UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark one) | ||
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019 | ||
OR | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number 001-04546
UNILEVER PLC
(Exact name of Registrant as specified in its charter)
ENGLAND
(Jurisdiction of incorporation or organization)
100 Victoria Embankment, London, England
(Address of principal executive offices)
R Sotamaa, Chief Legal Officer and Group Secretary
Tel: +44(0)2078225252, Fax: +44(0)2078225464
100 Victoria Embankment, London EC4Y 0DY, UK
(Name, telephone number, facsimile number and address of Company Contact)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Ordinary shares, nominal value of 3 1/9 pence per share | ULVR | New York Stock Exchange* | ||
American Depositary Shares (evidenced by Depositary Receipts) each representing one ordinary share of the nominal amount of 3 1/9p each | UL | New York Stock Exchange |
*Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Title of each class |
||
2.1% Notes due 2020 1.8% Notes due 2020 2.75% Notes due 2021 4.25% Notes due 2021 1.375% Notes due 2021 3.0% Notes due 2022 2.2% Notes due 2022 3.125% Notes due 2023 3.25% Notes due 2024 2.6% Notes due 2024 3.1% Notes due 2025 3.375% Notes due 2025 2.0% Notes due 2026 2.9% Notes due 2027 3.5% Notes due 2028 2.125% Notes due 2029 5.9% Notes due 2032 |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
The total number of outstanding shares of the issuer’s capital stock at the close of the period covered by the annual report was: 1,168,530,650 ordinary shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:
Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act. ☐
*The term ‘‘new or revised financial accounting standard’’ refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
If ‘Other’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes ☐ No ☒
CAUTIONARY STATEMENT
This document 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.
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.
Purpose-driven performance
One in three people around the world use our brands every day. With this reach comes responsibility – and opportunity. That’s why we’ve made it our purpose to make sustainable living commonplace. To help people live well within the limits of the planet. This isn’t just something we say – it steers our decisions and shapes our actions, at every level of the business.
Our focus on purpose goes back to the days of one of our founders, William Lever, well over 100 years ago. It’s part of Unilever history, and it’s integral to our future. This is why we want all our brands to take a stand, and act, on the big social and environmental issues facing the world. We believe we’ll be a better and more successful business by following this path.
To truly make sustainable living commonplace, we have to be fit for the future. This means anticipating the significant changes which are shaping our industry. Becoming fully digitised, lower cost, faster acting and more agile. Using our scale and influence to create positive change well beyond Unilever. Expanding into high-growth markets with superior products that are good for both people and the planet. And continuing to attract the very best people into a diverse, inclusive and flexible working culture.
Purpose-led, future-fit
Strategic Report |
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Financial highlights
|
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What we stand for:
Making sustainable living commonplace. |
€52.0 billion | |
turnover | ||
What we offer:
Beauty & Personal Care, Foods & Refreshment, Home Care |
€6.1 billion free cash flow* | |
Read more about our brands and consumers on pages 14 to 15. |
€4.2 billion | |
dividends paid | ||
19.1% | ||
underlying operating margin* | ||
16.8% | ||
operating margin |
Beauty & Personal Care
|
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What we stand for: |
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Beauty that cares for people, society and our planet. |
€21.9 billion turnover
| |
Our largest categories:
Deodorants, Haircare, Skin care, Skin cleansing |
42% of total turnover
| |
A selection of our brands: |
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Axe, Clear, Dove,
Lifebuoy, Lux, Pond’s, Rexona, |
52% of total operating profit
|
Foods & Refreshment
|
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What we stand for: |
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Taste good. Feel good. Force for good. |
€19.3 billion turnover
| |
Our largest categories: |
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Ice cream, Savoury, Dressings, Tea |
37% of total turnover
| |
A selection of our brands: |
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Ben & Jerry’s, Breyers, Brooke Bond, Heart (Wall’s), Hellmann’s, Knorr, Lipton, Magnum, Pukka, Sir Kensington’s, Unilever Food Solutions |
32% of total operating profit |
Home Care
|
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What we stand for: |
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Making your home a better world. Making our world a better home.
|
€10.8 billion turnover
| |
Our largest categories:
Fabric solutions, Home and hygiene
|
21% of total turnover
| |
A selection of our brands:
Cif, Dirt is Good (Omo, Persil), Domestos, Seventh |
16% of total operating profit |
Read more about our Divisions on pages 14 to 15.
* | Free cash flow and underlying operating margin are non-GAAP measures. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on page 27. |
Annual Report on Form 20-F 2019 | 3 |
We operate in a complex and volatile world. Our strategy is constantly evolving to adapt to the trends and forces shaping our markets and impacting our stakeholders.
Overview of our industry
As a leading global consumer goods company, we’re part of one of the world’s largest, most competitive and fast-moving industries. Yet, these are volatile and uncertain times. According to the World Bank, global growth decelerated markedly in 2019, with continued weakness in global trade and investment affecting both developed and developing and emerging economies. Geopolitical tensions and climate concerns are increasing the uncertainty. Conditions like these create challenges for companies and brands of all types.
Amongst the economic uncertainty, new technologies are changing the landscape of the consumer goods market, bringing opportunities to brands and consumers alike. Consumers are shopping through more diverse channels and smaller local brands are increasingly meeting shoppers’ needs.
As the global economy and the channel landscape evolve, we must be agile and responsive to capitalise on the opportunities. And by staying close to consumers and their needs we can ensure our business continues to grow, while having a positive impact on people and the planet.
The key trends affecting our stakeholders and our markets are outlined below.
Environment and society under stress
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Digital and technology revolution
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We’re in the midst of an environmental crisis. Our planet is heating, species are dying out at an unprecedented rate, and our rivers and oceans are filling with plastic. Global heating is placing an increasing strain on food, water and other resources – and rising migration is expected to put new pressures on cities, people, societies and governments.
As both younger and older generations call for businesses and politicians to do more, only international co-operation and bold action from businesses and brands will start to create the systemic change needed to protect our planet. The cost of inaction far outweighs the cost of action.
Related principal risks: Climate change, Plastic packaging, Ethical (pages 36 and 39)
For more on our response see pages 18 to 19.
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Technology continues to change the fabric of life and business. Enhanced AI, robotics and the internet of things (IoT) are reshaping how people live, work and interact with the world – and with brands. Intelligent technologies are optimising manufacturing and agriculture, connecting global businesses like ours inside and out, and changing how people shop.
Digital channels bring opportunities for more targeted marketing, deeper engagement and stronger connections between brands and consumers all over the world. Yet, with access to richer data and more intelligent analytics come risks and concerns around data security and privacy – businesses need to collect and use data in responsible ways.
Related principal risks: Business transformation, Supply chain, Customer, Systems and information (pages 36 to 38)
For more on our response see page 15.
| |||
Living differently
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The future of work
| |||
Societies are becoming more diverse and fragmented. We’re seeing, for example, growing splits between generations, socio-economic groups and political affiliations. As people increasingly interact with each other and with businesses online, consumers are making more decisions based on their values. They’re also using both on- and offline channels to find better, more personalised products and services more easily and quickly.
In this new digital media and retail landscape, brands have to be visible, convenient and part of the conversation – taking a stand and action on the issues people care about. The fragmentation of consumer expectations and retail channels creates both challenges and opportunities for companies like Unilever.
Related principal risks: Brand preference, Economic and political instability, Portfolio management (pages 35 and 38)
For more on our response see pages 14 to 15. |
The pace of change is affecting not only how people live, but how they work. Businesses of all types are becoming less hierarchical, more automated and more digital. As new roles and ways of working emerge, people increasingly need different skills – and they’re also demanding more flexibility from employers.
Companies that offer more varied types of employment can therefore attract the best people, while being more agile. But alongside flexibility, employees of all ages are increasingly looking for a fair, inclusive and purposeful place to work where they can be themselves and continue to learn.
Related principal risks: Talent, Business transformation (pages 37 to 38)
For more on our response see pages 16 to 17. |
8 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 11 |
Stakeholders are at the heart of our strategy and business model. Engaging with them helps us to understand their evolving needs and informs our strategic decision-making.
Our multi-stakeholder model
We’ve identified six stakeholder groups critical to our future success: consumers, our people, society (including suppliers), the planet, customers and shareholders. The stakeholder review on pages 14 to 21 provides an overview of how we’ve created value for our stakeholders in 2019 and some of the benefits we’ve gained as a business from nurturing these vital relationships.
Unilever has a dual-headed structure and is subject to Dutch, UK and US governance requirements as set out in the Governance Report on pages 47 to 78. Under the Dutch requirements, directors are responsible for weighing up the interests of stakeholders, with a view to ensuring long-term value creation and the continuity of the company. Under section 172 of the UK Companies Act 2006 (‘Section 172’) directors must act in the way that they consider, in good faith, would be most likely to promote the success of their company. In doing so, our Directors must have regard to stakeholders and the other matters set out in Section 172. Pages 12 and 13 comprise our Section 172 statement, which describes how the Directors have had regard to these matters when performing their duty.
In light of our purpose and our strategy to create long-term value as set out on page 9, our Directors take steps to understand the needs and priorities of each stakeholder group and do so via a number of mediums, including by direct engagement or via their delegated committees and forums. The relevance of each stakeholder may change depending on the matter at hand. In line with the Dutch requirements and the UK Companies Act 2006, below we provide a high-level summary of the concerns of our stakeholders and how our Directors engaged with them and had regard to their interests when setting Unilever’s strategy and taking decisions concerning the business in 2019.
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Consumers A good understanding of people’s needs is critical to our long-term success. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
As the ultimate user of our products, consumers continue to look for quality products that are convenient and good value – and increasingly want more natural ingredients and less packaging and waste. We also know that brands that demonstrate a meaningful purpose create conversations and brand loyalty, particularly among younger generations. | Through our Consumer Carelines we had over three million interactions through calls, emails, letters, social media and webchats. We also consulted with almost two million consumers this year through regular surveys using partners like Kantar, Nielsen and Ipsos. Unilever Leadership Executive (ULE) members spoke directly to consumers when visiting markets, and our leadership received regular updates and recommendations based on consumer insights. | Our Board and ULE members are regularly informed of consumer needs, preferences and concerns – and consider these when making decisions. The agenda for our leadership forum was shaped by a piece of work called the Fundamentals of Growth, based entirely on consumer insights. The findings from consumer surveys help us define and refine the unique purpose of our brands.
For more on consumers see pages 14 to 15. |
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Our people Without talented and committed employees, we could never deliver on our ambitions. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
Our employee surveys tell us that Unilever people tend to have a sense of personal purpose and believe they can live their purpose at work – helping them to go the extra mile. While most employees think we have the right strategy in place to win, they also want to see faster action and decision-making across the business. Our people would also like a continued push towards diversity, particularly at the most senior levels. | Our annual UniVoice survey, available in 48 languages, gives employees at all levels the chance to share views with line managers, colleagues and leadership. In 2019, we had an 82% response rate. Every month we also run smaller pulse surveys to collect real-time insights on key issues. | In an October meeting, our Board discussed how best to nurture a more flexible, agile culture. The Board looks at the UniVoice findings each year, and reviewed this year’s in November. We also held a series of meetings with a cross-section of employees, where non-executive Board members talk about important topics from the UniVoice survey. In 2019, there were two meetings in the UK and two in Brazil to discuss purpose, talent development and sustainability.
For more on people see pages 16 to 17 and 48. |
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Society We depend on people and communities all over the world to help source, make and sell our products. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
Equality and inclusion, human rights within our operations and supply chain, and health and wellbeing are important issues for our stakeholders. Water scarcity and climate change are also challenges for many people in developing and emerging markets – reflecting the interconnectivity between the environment and society. | Our leadership engage with NGOs and policymakers to drive system change. Our ULE members, including those on the Board, each own relationships and advocacy around key issues. Our Chief Supply Chain Officer, for example, is part of the World Economic Forum (WEF) community focused on supply chains. This year, as part of our issues prioritisation (materiality) process, we evaluated a range of inputs from stakeholders to understand the most pressing societal issues and where we can make a difference. | The Board’s Corporate Responsibility Committee (see pages 56 to 57) meets four times a year to discuss sustainability issues of strategic importance. Our USLP Advisory Council – seven independent external specialists in sustainability – also guide and critique the development of our strategy. They met with members of the ULE during the year to share insights on supply chain and human rights.
For more on society see page 18. |
12 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Planet We rely on nature for many ingredients and raw materials. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
Awareness of the environmental impact of human activity on the planet is growing. Top concerns include plastic waste, climate change and water scarcity. Loss of biodiversity is also rising up the agenda. We’re seeing growing movements for change around the world, as well as a real desire for businesses to limit their use of plastic and take bold action on climate. | Our Board and ULE members have responsibility for key environmental issues: our CEO works with the Ellen MacArthur Foundation and the WEF on driving the circular economy, for example. Our ULE members attend meetings, sit on boards, sponsor key workstreams and make sure we have strong and mutually beneficial relationships with our partner organisations. This year, our CEO attended the UN General Assembly’s Climate Week in New York. As part of our issues prioritisation (materiality) process, we analysed insights from stakeholders to make sure we’re focusing on the most important environmental issues. | The Board’s Corporate Responsibility Committee and USLP Advisory Council (see Society on page 18) discuss key environmental issues. In 2019 the USLP Advisory Council met with members of the ULE to share insights on plastic. Environmental issues form part of our boardroom and ULE discussions and decision-making. Our ambitious new goals around plastic are a good example: our leadership will oversee how these are being delivered, both across our business and through our partnerships. During 2019, there were a number of discussions around the development of our Compass strategy, including our climate goals.
For more on the planet see page 19. |
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Customers We depend on many types of retail partners all around the world to sell our products. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
In developing and emerging markets, the small retailers we partner with are increasingly seizing the opportunities of e-commerce. And our larger retail partners are looking to become more competitive in online channels, as well as against discount stores offering convenience and very low prices. Retailers want products that are suitable for each sales channel, whether premium or online. They also want more sustainable products that will help them differentiate their offering. | Our larger retail partners have direct channels into us. We actively manage these relationships through our specialist Customer Development team. In 2019, we discussed a range of sustainability issues with our customers. Through Unilever’s digital e-commerce apps, we receive direct feedback from the smaller local stores we partner with to help improve our service to them. | Our Board and ULE were involved in approving the strategy to digitise small stores and related investments. In a number of markets, such as India and Indonesia, we’ve introduced smartphone apps so that retailers can place product orders directly – and we’re refining these based on user needs. In response to customer feedback, we’ve introduced retail programmes around the world focused on reducing plastic and food waste. We’re also designing products appropriate for each channel, which will help our customers differentiate themselves.
For more on customers see page 20. |
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Shareholders As owners of our company and providers of capital, shareholders are instrumental to our growth. |
Interests and concerns |
How we engaged in 2019 |
Considerations and outcomes | ||
As well as ongoing interest in our performance and growth, we’ve been having conversations with shareholders around our acquisitions and disposals strategy, our corporate structure, capital allocation and our use of plastic and palm oil – reflecting a growing interest in sustainability issues. | We speak directly to shareholders through investor events, meetings and calls with shareholders, quarterly results broadcasts and conference presentations. Our ULE members attend investor events, and senior leaders and our Board speak directly to shareholders at investor meetings on a broad range of issues. This year, we had focused meetings with shareholders on remuneration, held a sustainability event for investors and issued a webcast on palm oil. | Shareholder feedback – particularly around dividends, our merger and acquisitions strategy and our corporate structure – forms a part of boardroom conversations. After each quarterly market update, our CEO shares feedback with the Board. In 2019, Vittorio Colao, Chair of the Compensation Committee, discussed shareholder concerns around remuneration with the Board and wrote to shareholders explaining subsequent changes to remuneration. These were published in our remuneration report and put to shareholders for voting.
For more on shareholders see page 21. |
Annual Report on Form 20-F 2019 | 13 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 15 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 17 |
We measure our success by tracking both non-financial and financial key performance indicators that reflect our strategic priorities.
Non-financial performance
Target | 2019 | 2018 | 2017 | |||||||||||||
Improving health & wellbeing Big Goal: By 2020 we will help more than a billion people take action to improve their health and wellbeing. See page 18. |
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Health & hygiene Target: By 2020 we will help more than a billion people to improve their health and hygiene. This will help reduce the incidence of life-threatening diseases like diarrhoea. |
1 billion | |
On ground reach: 615 million |
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On ground reach: 570 million |
D |
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On ground reach: 523 million |
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TV reach: 710 million |
* |
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TV reach: 670 million |
* |
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TV reach: 78 million |
* | ||||||||
Nutrition Target: By 2020 we will double (i.e. up to 60%) the proportion of our portfolio that meets the highest nutritional standards, based on globally recognised dietary guidelines. This will help hundreds of millions of people to achieve a healthier diet. |
60% | 56% | † | 48% | 39% | ◇ | ||||||||||
Reducing environmental impact Big Goal: By 2030 our goal is to halve the environmental footprint of the making and use of our products as we grow our business. See page 19. |
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Greenhouse gases Target: Halve the greenhouse gas impact of our products across the lifecycle (from the sourcing of the raw materials to the greenhouse gas emissions linked to people using our products) by 2030 (greenhouse gas impact per consumer use).+ |
(50%) | 2% | † | 6% | 9% | ◇ | ||||||||||
Target: By 2020 CO2 emissions from energy from our factories will be at or below 2008 levels despite significantly higher volumes (reduction in CO2 from energy per tonne of production since 2008).** |
£145.92 | 50.76 | † | 70.46 | D | 76.77 | ◇ | |||||||||
Water Target: Halve the water associated with the consumer use of our products by 2020 (water impact per consumer use). |
(50%) | 1% | † | (2%) | (2%) | ◇ | ||||||||||
Target: By 2020 water abstraction by our global factory network will be at or below 2008 levels despite significantly higher volumes (reduction in water abstraction per tonne of production since 2008).** |
£2.97 | 1.58 | † | 1.67 | D | 1.80 | ◇ | |||||||||
Waste Target: Halve the waste associated with the disposal of our products by 2020 (waste impact per consumer use). |
(50%) | (32%) | (31%) | D | (29%) | |||||||||||
Target: By 2020 total waste sent for disposal will be at or below 2008 levels despite significantly higher volumes (reduction in total waste per tonne of production since 2008).** |
£7.91 | 0.30 | † | 0.23 | D^ | 0.18 | ◇ | |||||||||
Sustainable sourcing Target: By 2020 we will source 100% of our agricultural raw materials sustainably (% of tonnes purchased). |
100% | 62% | 56% | 56% | ||||||||||||
Enhancing livelihoods Big Goal: By 2020 we will enhance the livelihoods of millions of people as we grow our business. See page 18. |
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Fairness in the workplace Target: By 2020 we will advance human rights across our operations and extended supply chain, by: |
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• Sourcing 100% of procurement spend from suppliers meeting the mandatory requirements of the Responsible Sourcing Policy (% of spend of suppliers meeting the Policy). |
100% | 70% | 61% | ‡D | 55% | ‡◇ | ||||||||||
• Reducing workplace injuries and accidents (Total Recordable Frequency Rate of workplace accidents per million hours worked)**. |
0.76 | ¤† | 0.69 | D | 0.89 | ◇ | ||||||||||
Opportunities for women Target: By 2020 we will empower 5 million women, by: |
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• Promoting safety for women in communities where we operate. • Enhancing access to training and skills (number of women). • Expanding opportunities in our value chain (number of women). |
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5 million |
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2.34 million |
± |
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1.85 million |
D |
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1.26 million |
◇ | ||||
• Building a
gender-balanced organisation with a focus on management |
50% | 51% | 49% | D | 47% | ◇ | ||||||||||
Inclusive business Target: By 2020 we will have a positive impact on the lives of 5.5 million people by: |
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• Enabling small-scale retailers to access initiatives aiming to improve their income (number of small-scale retailers). |
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5 million |
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1.81 million |
†± |
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1.73 million |
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1.60 million |
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• Enabling smallholder farmers to access initiatives aiming to improve their agricultural practices (number of smallholder farmers). |
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0.5 million |
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0.79 million |
†± |
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0.75 million |
|
|
0.72 million |
◇ |
Baseline 2010 unless otherwise stated
** | Key Non-Financial Indicators. |
† | PricewaterhouseCoopers assured in 2019. For details and 2019 basis of preparation see www.unilever.com/investor-relations/annual-report-and-accounts/ |
D | PricewaterhouseCoopers assured in 2018. For details and 2018 basis of preparation see www.unilever.com/sustainable-living/our-approach-to-reporting/reports-and-publications-archive |
◇ | PricewaterhouseCoopers assured in 2017. For details and 2017 basis of preparation see www.unilever.com/sustainable-living/our-approach-to-reporting/reports-and-publications-archive |
* | The number of people reached through TV advertisements and programmes aimed at encouraging health and hygiene behaviour change (‘TV reach’) was only measured for our Oral Care brands in 2017. Lifebuoy and Dove started measuring TV reach in 2018 and 2019 respectively. |
‡ | During 2017 and 2018 we amended how we assessed compliance with the Responsible Sourcing Policy, hence year-on-year data is not comparable. |
± | Around 568,000 women have accessed initiatives under both the Inclusive Business and the Opportunities for Women pillars in 2019. |
( ) | Brackets around environmental targets indicate that our aim is to reduce our greenhouse gas, waste and water footprints. Brackets around the corresponding actuals indicate that we have reduced our footprints by the numbers quoted. |
+ | Target approved by the Science Based Targets Initiative. |
^ | Restated from 0.20 kg/tonne of production due to a classification error during the data reporting process. |
¤ | 2019 Total Recordable Frequency Rate (TRFR) includes for the first time all acquisitions which operate as decentralised business units, as we now have processes in place to collect the data. Had we included these acquisitions in 2017 and 2018, our reported TRFR would have been approximately 6% higher in each year. |
22 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Financial performance
2019 | 2018 | 2017 | ||||||||||
(Restated | )(a) | (Restated | )(a) | |||||||||
Group
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Turnover growth Turnover growth averaged 1.6% over five years |
2.0% | (5.1% | ) | 1.9% | ||||||||
Underlying sales growth* Underlying sales growth averaged 3.3% over five years |
2.9% | 3.2% | 2.8% | |||||||||
Underlying volume growth* Underlying volume growth averaged 1.4% over five years |
1.2% | 1.9% | 0.8% | |||||||||
Operating margin
|
16.8% | 24.8% | 16.7% | |||||||||
Underlying operating margin*
|
19.1% | 18.6% | 17.7% | |||||||||
Free cash flow*
|
|
€6.1 billion |
|
|
€5.4 billion |
|
|
€5.8 billion |
| |||
Cash flow from operating activities |
|
€10.6 billion |
|
|
€9.6 billion |
|
|
€10.0 billion |
| |||
Cash flow (used in)/from investing activities |
|
(€2.2 billion |
)
|
|
€4.6 billion |
|
|
(€5.9 billion |
)
| |||
Cash flow (used in)/from financing activities |
|
(€4.7 billion |
)
|
|
(€12.1 billion |
)
|
|
(€2.0 billion |
)
| |||
Divisions
|
||||||||||||
Beauty & Personal Care Turnover |
|
€21.9 billion |
|
|
€20.6 billion |
|
|
€20.7 billion |
| |||
Turnover growth |
6.0% | (0.3% | ) | 2.6% | ||||||||
Underlying sales growth |
2.6% | 3.4% | 2.9% | |||||||||
Operating margin |
20.7% | 20.2% | 20.0% | |||||||||
Underlying operating margin |
22.7% | 22.0% | 21.3% | |||||||||
Foods & Refreshment Turnover |
|
€19.3 billion |
|
|
€20.2 billion |
|
|
€22.4 billion |
| |||
Turnover growth |
(4.6% | ) | (9.9% | ) | (0.4% | ) | ||||||
Underlying sales growth |
1.5% | 2.2% | 2.1% | |||||||||
Operating margin |
14.6% | 36.0% | 16.3% | |||||||||
Underlying operating margin |
17.5% | 17.7% | 16.8% | |||||||||
Home Care Turnover |
|
€10.8 billion |
|
|
€10.1 billion |
|
|
€10.6 billion |
| |||
Turnover growth |
6.9% | (4.2% | ) | 5.6% | ||||||||
Underlying sales growth |
6.1% | 4.7% | 4.4% | |||||||||
Operating margin |
12.7% | 11.7% | 11.0% | |||||||||
Underlying operating margin |
14.8% | 13.3% | 12.4% |
(a) | Restated following adoption of IFRS 16, see note 1 and note 24 for further details, and the change in treatment of hyperinflationary economies in underlying sales growth, see page 29 for further details. |
* | Key Financial Indicators. |
Underlying sales growth, underlying volume growth, underlying operating margin and free cash flow are non-GAAP measures. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on pages 27 to 32.
Annual Report on Form 20-F 2019 | 23 |
2019 performance
The Group generated turnover of €52.0 billion, operating profit of €8.7 billion and net profit of €6.0 billion.
Turnover growth at 2.0% was lower than underlying sales growth of 2.9% reflecting a negative impact of the spreads disposal partially offset by a positive impact from currency.
Emerging markets performed well with underlying sales growth of 5.3% but developed markets declined by 0.5% mainly as a result of difficult and deflationary conditions in Europe. Overall underlying sales growth was slightly below expectation due to slow down experienced in the last quarter. Price growth decelerated in the fourth quarter as a result of pricing reductions in India and low inflation in Turkey. Africa declined due challenges in West Africa where there were distributor stock resets in Ghana and Nigeria.
Argentina’s and Venezuela’s hyperinflationary conditions persisted during 2019 and Zimbabwe also became hyperinflationary during the year. In our calculation of underlying sales growth we exclude price growth in excess of 26% in hyperinflationary economies. See pages 28 to 29 for more details.
Nine business acquisition deals were completed during the year spanning across all Divisions and the global Alsa baking and dessert business was sold in the first half of the year. More details on acquisitions and disposals are in note 21 on pages 134 to 136.
Within non-underlying costs, during the year the Group spent €1,159 million (2018: €914 million) on restructuring; both supply chain optimisation projects to improve gross margin and organisational change projects to reduce overheads. Supply chain activities were concentrated in the manufacturing and logistics networks, particularly in Europe and the Americas. Change projects in the markets were focused on transforming the organisation to make it future-fit and digitally enabled, as well as reducing the overhead base in businesses impacted by the spreads disposal.
Highlights for the year ended
Beauty & Personal Care
|
Foods & Refreshment
|
Home Care
|
Group
|
|||||||||||||||||||||||||||||||||||||||||
2019 | 2018 (Restated)(a) |
2019 | 2018 (Restated)(a) |
2019 | 2018 (Restated)(a) |
2019 | 2018 (Restated)(a) |
|||||||||||||||||||||||||||||||||||||
Turnover (€ million) | 21,868 | 20,624 | 19,287 | 20,227 | 10,825 | 10,131 | 51,980 | 50,982 | ||||||||||||||||||||||||||||||||||||
Underlying sales growth^ (%) | 2.6 | 3.4 | 1.5 | 2.2 | 6.1 | 4.7 | 2.9 | 3.2 | ||||||||||||||||||||||||||||||||||||
Underlying volume growth (%) | 1.7 | 2.5 | (0.2 | ) | 1.3 | 2.9 | 2.3 | 1.2 | 1.9 | |||||||||||||||||||||||||||||||||||
Underlying price growth^ (%) | 0.9 | 0.9 | 1.7 | 0.9 | 3.1 | 2.4 | 1.6 | 1.2 | ||||||||||||||||||||||||||||||||||||
Operating profit (€ million) | 4,520 | 4,165 | 2,811 | 7,287 | 1,377 | 1,187 | 8,708 | 12,639 | ||||||||||||||||||||||||||||||||||||
Underlying operating profit (€ million) | 4,960 | 4,543 | 3,382 | 3,576 | 1,605 | 1,344 | 9,947 | 9,463 | ||||||||||||||||||||||||||||||||||||
Operating margin (%) | 20.7 | 20.2 | 14.6 | 36.0 | 12.7 | 11.7 | 16.8 | 24.8 | ||||||||||||||||||||||||||||||||||||
Underlying operating margin (%) | 22.7 | 22.0 | 17.5 | 17.7 | 14.8 | 13.3 | 19.1 | 18.6 | ||||||||||||||||||||||||||||||||||||
Return on assets (%) |
124 | 117 | 61 | 58 | 99 | 86 | 89 | 82 |
(a) | Restated following adoption of IFRS 16 and the change in treatment of hyperinflationary economies in underlying sales growth. See note 1, note 24 and pages 28 to 29 for further details. |
^ | Wherever referenced in this announcement, underlying sales growth and underlying price growth do not include price growth in excess of 26% per year in hyperinflationary economies. See pages 28 to 29 on non-GAAP measures for more details. |
Relative size of Divisions
24 | Annual Report on Form 20-F 2019 |
Strategic Report |
![]() |
Divisional review
Beauty & Personal Care
TURNOVER grew by 6.0% coming from underlying sales growth of 2.6%, a favourable currency related impact of 2.4% and a positive contribution of 0.9% from acquisitions.
Deodorants delivered strong, broad-based growth, supported by double digit growth from Dove. The Rexona Clinical range, with patented anti-perspirant technology to better serve consumer needs, and Dove’s zero aluminium range performed well. Growth in skin cleansing was muted by price reductions as a result of lower commodity prices. Dove’s growth in skin cleansing was supported by microbiome-friendly innovations. Growth was weak in hair care with high competitive intensity in the US and continued pressure from local players in China. Japan and Europe also underperformed. In skin care, Pond’s and Vaseline continued to perform well, with on-trend innovations such as Pond’s Glow Up cream. We expanded into white space markets with our Simple brand, which is now in 30 markets, including Turkey and the Gulf region. Oral care grew slightly and natural variants such as charcoal, aloe and clove drove growth in Smile.
Prestige brands continued to deliver double digit growth, with strong performances from brands such as Dermalogica, Hourglass and Living Proof. Carver Korea and Sundial had a more challenging year. We added to our prestige portfolio by acquiring Garancia, a French derma-cosmetic brand, and Tatcha, a modern skincare brand rooted in classical Kyoto rituals.
UNDERLYING OPERATING PROFIT increased by €417 million to €4,960 million. Turnover growth and underlying operating margin improvement added €274 million and €143 million respectively. Underlying operating margin improvement of 70bps was driven by efficiencies in brand and marketing investment and overheads from the zero-based budgeting programme. Non-underlying costs of €440 million were slightly higher than last year; most were related to the ongoing restructuring programme. Operating Profit increased by €355 million.
Foods & Refreshment
TURNOVER declined by 4.6% reflecting the disposal of the spreads business in the second half of 2018. The net impact of acquisitions and disposals on revenue was a reduction of 6.9% whilst underlying sales growth was 1.5% and currency movements had a favourable impact of 1.0%.
Ice cream grew, however volumes declined due to a strong comparator from a particularly good European summer in the prior year. Growth was supported by plant based and ‘better for you’ offerings, including Magnum vegan and Ben & Jerry’s lighter Moophoria variants. Tea also had price-led growth with declining volume due to subdued consumer demand for black tea in developed markets. Premium black tea, black tea in emerging markets and fruit and herbal variants, including our premium herbal brand Pukka, performed well. In dressings, Hellmann’s grew, with the US business returning to growth in the second half of the year. The Hellmann’s vegan mayonnaise variant is now on shelves in over 20 countries while Sir Kensington’s premium ranges of mayonnaise and salad dressings grew strongly in the US, with the brand now more than doubled in size since the acquisition. Price-led growth in savoury was supported by Knorr’s portfolio in scratch cooking and the launch of snacking ranges which address the convenience trend. Savoury declined in Europe, most notably in Germany as a result of the loss of a key customer for a period of time, sales to this customer have now resumed The newly-acquired brand The Vegetarian Butcher entered a partnership with Burger King® to offer the Rebel Whopper® across 25 countries in Europe.
UNDERLYING OPERATING PROFIT decreased by €194 million to €3,382 million. Turnover and underlying operating margin decline contributed €166 million and €28 million respectively. Underlying operating margin decreased by 20bps as a result of a lower gross margin from weak pricing and higher supply chain costs. The non-underlying costs of €571 million in the year were related to additional restructuring within the business following the spreads disposal in 2018. Operating Profit decreased by €4,476 million which was primarily due to last year’s operating profit including a €4,331 million profit arising from the sale of the spreads business.
Home Care
TURNOVER grew by 6.9% largely coming from underlying sales growth of 6.1% and a favourable currency impact of 0.4%.
Home and hygiene performed well, benefitting from products such as Cif surface sprays with natural cleaning ingredients. Hand dish wash saw continued growth momentum, with good performance from Sunlight with recycled packaging, as well as white space launches in Brazil with Brilhante and in China with Omo. Format premiumisation continued to be a growth driver in fabric, with good growth in liquids and capsules. Laundry brand Seventh Generation, based on renewable plant-based ingredients, grew strongly. Fabric performance was supported by ongoing market development driven growth in India, where we also launched premium detergent brand Love & Care. In China we successfully launched Love Home & Planet. Home Care turnover in Africa was lower than expected and declined driven by a reduction in both volume and price.
UNDERLYING OPERATING PROFIT increased by €261 million to €1,605 million. Turnover growth and underlying operating margin improvement added €92 million and €169 million respectively. Underlying operating margin improvement of 150bps was driven by a strong gross margin improvement and lower overheads. Gross margin improved due to strong pricing and positive mix. Non-underlying costs of €228 million primarily related to restructuring programmes. Operating Profit increased by €190 million.
Annual Report on Form 20-F 2019 | 25 |
Financial review continued
26 | Annual Report on Form 20-F 2019 |
Strategic Report |
![]() |
Annual Report on Form 20-F 2019 | 27 |
Financial review continued
Underlying sales growth
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.
Previously, USG was calculated on a different basis as explained on treatment of hyperinflationary economies in underlying sales growth section below. 2018 and 2017 comparative numbers have been restated for the new basis.
The reconciliation of USG to changes in the GAAP measure turnover is as follows:
2019 vs 2018 (%) |
Beauty & Personal Care |
Foods & Refreshment |
Home Care |
Total Group |
||||||||||||
Turnover growth(a) | 6.0 | (4.6 | ) | 6.9 | 2.0 | |||||||||||
Effect of acquisitions | 0.9 | 0.6 | 0.3 | 0.7 | ||||||||||||
Effect of disposals | - | (7.5 | ) | - | (3.0 | ) | ||||||||||
Effect of currency-related items, | 2.4 | 1.0 | 0.4 | 1.5 | ||||||||||||
of which: | ||||||||||||||||
Exchange rate changes |
1.7 | (3.5 | ) | (0.3 | ) | (0.7 | ) | |||||||||
Extreme price growth in hyperinflationary markets(b) |
0.6 | 4.7 | 0.7 | 2.2 | ||||||||||||
Underlying sales growth(b) |
2.6 | 1.5 | 6.1 | 2.9 | ||||||||||||
2018 vs 2017 (%) | ||||||||||||||||
Turnover growth(a) | (0.3 | ) | (9.9 | ) | (4.2 | ) | (5.1 | ) | ||||||||
Effect of acquisitions | 3.9 | 0.8 | 0.5 | 2.0 | ||||||||||||
Effect of disposals | – | (7.2 | ) | (0.2 | ) | (3.0 | ) | |||||||||
Effect of currency-related items, | (7.2 | ) | (5.8 | ) | (8.8 | ) | (7.0 | ) | ||||||||
of which: | ||||||||||||||||
Exchange rate changes |
(8.1 | ) | (47.7 | ) | (9.1 | ) | (29.4 | ) | ||||||||
Extreme price growth in hyperinflationary markets(b) |
1.0 | 79.1 | 0.4 | 31.7 | ||||||||||||
Underlying sales growth(b) |
3.4 | 2.2 | 4.7 | 3.2 | ||||||||||||
2017 vs 2016 (%) | ||||||||||||||||
Turnover growth(a) | 2.6 | (0.4 | ) | 5.6 | 1.9 | |||||||||||
Effect of acquisitions | 1.8 | 0.2 | 3.1 | 1.3 | ||||||||||||
Effect of disposals | (0.1 | ) | (0.8 | ) | (0.2 | ) | (0.4 | ) | ||||||||
Effect of currency-related items, | (1.9 | ) | (1.8 | ) | (1.7 | ) | (1.8 | ) | ||||||||
of which: | ||||||||||||||||
Exchange rate changes |
(1.9 | ) | (4.3 | ) | (1.7 | ) | (2.8 | ) | ||||||||
Extreme price growth in hyperinflationary markets(b) |
- | 2.5 | - | 1.1 | ||||||||||||
Underlying sales growth(b) |
2.9 | 2.1 | 4.4 | 2.8 |
(a) | Turnover growth is made up of distinct individual growth components, namely underlying sales, currency impact, acquisitions and disposals. Turnover growth is arrived at by multiplying these individual components on a compounded basis as there is a currency impact on each of the other components. Accordingly, turnover growth is more than just the sum of the individual components. |
(b) | Underlying price growth in excess of 26% per year in hyperinflationary economies has been excluded when calculating the underlying sales growth in the tables above, and an equal and opposite amount is shown as extreme price growth in hyperinflationary markets. |
28 | Annual Report on Form 20-F 2019 |
Strategic Report |
![]() |
Treatment of hyperinflationary economies in underlying sales growth
Previously Underlying Sales Growth (USG) excluded all price growth from countries where the impact of consumer price inflation (CPI) rates had escalated to extreme levels. There were two countries where we had determined extreme levels of CPI existed. Price growth in Venezuela has been excluded from USG since Q4 2017 and price growth in Argentina has been excluded from USG since Q3 2018. This approach was adopted for Argentina in 2018 as it was considered that hyperinflationary conditions would only exist for a short while and thus all price movements would be related to hyperinflation.
Following a review during 2019, we now consider that hyperinflationary conditions are likely to persist for some time and thus price growth will represent both hyperinflationary price growth plus normal pricing actions. As a result, our definition of USG has been updated to include price growth in markets deemed to be hyperinflationary economies, up to a maximum of 26% per year (equivalent to approximately 2% per month compounded). 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.
The change is intended to ensure our reporting provides a more realistic representation of underlying performance. Price increases in hyperinflationary economies reflect normal pricing actions that relate to fluctuations in demand, changes in commodity and other operating costs and tactical steps to drive competitiveness, in addition to the exceptional pricing actions taken to respond to hyperinflationary conditions. The new USG definition aims to include these normal pricing actions but excludes the exceptional pricing actions that give rise to the extreme impact that results from hyperinflation.
Also, as a consequence of this change, we are providing a breakdown of the impact of currency-related items on turnover. Whilst previously the devaluation of the currency and all price growth in hyperinflationary economies were grouped under “exchange rate” (now called “currency-related items”), we are now breaking this down between:
• | exchange rate changes (including the devaluation of hyperinflationary currencies); and |
• | extreme price growth in hyperinflationary economies (i.e. price growth that is not included in underlying price growth). |
The table below show the impact of this change on USG, UPG and currency-related items on the previously reported numbers:
2018 | 2017 | |||||||||||||||||||||||||||||||||||
Underlying sales growth and underlying price growth (%)
|
Beauty & Personal Care |
Foods & Refresh- ment |
Home Care |
Total | Beauty & Personal Care |
Foods & Refresh- ment |
Home Care |
Total | ||||||||||||||||||||||||||||
Previously reported | ||||||||||||||||||||||||||||||||||||
Underlying sales growth | 3.1 | 2.0 | 4.2 | 2.9 | 2.9 | 2.7 | 4.4 | 3.1 | ||||||||||||||||||||||||||||
Underlying price growth | 0.6 | 0.7 | 1.9 | 0.9 | 1.5 | 3.0 | 2.3 | 2.3 | ||||||||||||||||||||||||||||
Restated | ||||||||||||||||||||||||||||||||||||
Underlying sales growth | 3.4 | 2.2 | 4.7 | 3.2 | 2.9 | 2.1 | 4.4 | 2.8 | ||||||||||||||||||||||||||||
Underlying price growth | 0.9 | 0.9 | 2.4 | 1.2 | 1.5 | 2.3 | 2.3 | 2.0 | ||||||||||||||||||||||||||||
Currency related changes (%)
|
||||||||||||||||||||||||||||||||||||
Previously reported | ||||||||||||||||||||||||||||||||||||
Currency related items | (7.0 | ) | (5.6 | ) | (8.3 | ) | (6.7 | ) | (1.9 | ) | (2.4 | ) | (1.7 | ) | (2.1 | ) | ||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||||||||||
Exchange rate changes |
||||||||||||||||||||||||||||||||||||
Extreme price growth in hyperinflationary markets |
||||||||||||||||||||||||||||||||||||
Restated | ||||||||||||||||||||||||||||||||||||
Currency related items | (7.2 | ) | (5.8 | ) | (8.8 | ) | (7.0 | ) | (1.9 | ) | (1.8 | ) | (1.7 | ) | (1.8 | ) | ||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||||||||||
Exchange rate changes |
(8.1 | ) | (47.4 | ) | (9.1 | ) | (29.4 | ) | (1.9 | ) | (4.3 | ) | (1.7 | ) | (2.8 | ) | ||||||||||||||||||||
Extreme price growth in hyperinflationary markets |
1.0 | 79.1 | 0.4 | 31.7 | - | 2.5 | - | 1.1 |
Annual Report on Form 20-F 2019 | 29 |
Financial review continued
30 | Annual Report on Form 20-F 2019 |
Strategic Report |
![]() |
Annual Report on Form 20-F 2019 | 31 |
Financial review continued
Return on assets
Return on assets is a measure of the return generated on assets for each division. This measure provides additional insight on the performance of the divisions and assists in formulating long-term strategies with respect to allocation of capital across divisions. Division return on assets is calculated as underlying operating profit after tax for the division divided by the annual average of: property, plant and equipment, net assets held for sale (excluding goodwill and intangibles), inventories, trade and other current receivables, and trade payables and other current liabilities for each division. The annual average is computed by adding the amounts at the beginning and the end of the calendar year and dividing by two.
2019 | € million Beauty & |
€ million Foods & |
€
million Care |
€ million
Total |
||||||||||||
Underlying operating profit before tax | 4,960 | 3,382 | 1,605 | 9,947 | ||||||||||||
Tax on underlying operating profit | (1,265 | ) | (862 | ) | (409 | ) | (2,536 | ) | ||||||||
Underlying operating profit after tax |
3,695 | 2,520 | 1,196 | 7,411 | ||||||||||||
Property plant and equipment | 4,382 | 5,336 | 2,344 | 12,062 | ||||||||||||
Net assets held for sale | 5 | 63 | 10 | 78 | ||||||||||||
Inventories | 1,793 | 1,698 | 673 | 4,164 | ||||||||||||
Trade and other receivables | 2,817 | 2,484 | 1,394 | 6,695 | ||||||||||||
Trade payables and other current liabilities | (5,941 | ) | (5,588 | ) | (3,239 | ) | (14,768 | ) | ||||||||
Period end assets (net) | 3,056 | 3,993 | 1,182 | 8,231 | ||||||||||||
Average assets for the period (net) | 2,985 | 4,146 | 1,204 | 8,335 | ||||||||||||
Division return on assets | 124% | 61% | 99% | 89% | ||||||||||||
2018 (Restated)(a) | ||||||||||||||||
Underlying operating profit before tax | 4,543 | 3,576 | 1,344 | 9,463 | ||||||||||||
Tax on underlying operating profit | (1,168 | ) | (919 | ) | (345 | ) | (2,432 | ) | ||||||||
Underlying operating profit after tax | 3,375 | 2,657 | 999 | 7,031 | ||||||||||||
Property plant and equipment | 4,336 | 5,473 | 2,279 | 12,088 | ||||||||||||
Net assets held for sale | 1 | 25 | - | 26 | ||||||||||||
Inventories | 1,736 | 1,762 | 803 | 4,301 | ||||||||||||
Trade and other receivables | 2,319 | 3,024 | 1,139 | 6,482 | ||||||||||||
Trade payables and other current liabilities | (5,478 | ) | (5,984 | ) | (2,995 | ) | (14,457 | ) | ||||||||
Period end assets (net) | 2,914 | 4,300 | 1,226 | 8,440 | ||||||||||||
Average assets for the period (net) | 2,887 | 4,564 | 1,155 | 8,606 | ||||||||||||
Division return on assets | 117% | 58% | 86% | 82% |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Other information
2018 financial review
The financial review for the year ended 31 December 2018 can be found on pages 20 to 26 of our Annual Report and Accounts on Form 20-F filed with the United States Securities and Exchange Commission on 11 March 2019.
Accounting standards and critical accounting policies
The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and IFRS as issued by the International Accounting Standards Board. The accounting policies are consistent with those applied in 2018 except for the recent accounting developments as set out in note 1 on pages 92 to 93. The critical accounting estimates and judgements and those that are most significant in connection with our financial reporting are set out in note 1 on pages 91 to 92.
Auditors report
The independent auditors’ report issued by KPMG Accountants N.V. and KPMG LLP on the consolidated results of the Group, as set out in the financial statements, were unqualified and contained no exceptions or emphasis of matter. For more details see pages 79 to 86.
32 | Annual Report on Form 20-F 2019 |
Our risks continued
Viability statement
The Directors have reviewed the long-term prospects of the Group in order to assess its viability. This review incorporated the activities and key risks of the Group together with the factors likely to affect the Group’s future development, performance, financial position, cash flows, liquidity position and borrowing facilities as described on pages 1 to 32. In addition, we describe in notes 15 to 18 on pages 116 to 132 the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risk.
Assessment
In order to report on the long-term viability of the Group, the Directors reviewed the overall funding capacity and headroom available to withstand severe events and carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. This assessment also included reviewing and understanding the mitigation factors in respect of each principal risk. The risk factors are summarised on pages 35 to 39.
The viability assessment has three parts:
• | First, the Directors considered the period over which they have a reasonable expectation that the Group will continue to operate and meet its liabilities; |
• | Second, they considered the current debt facilities and debt headroom over the viability period, assuming that any debt maturing can be re-financed at commercially acceptable terms; and |
• | Third, they considered the potential impact of severe but plausible scenarios over this period, including: |
• | assessing scenarios for each individual principal risk, for example the termination of our relationships with the three largest global customers; the loss of all material litigation cases; a major IT data breach, reputational damage from not progressing against our plastic packaging commitments, and the lost cost and growth opportunities from not keeping up with technological changes; and |
• | assessing scenarios that involve more than one principal risk including the following multi risk scenarios: |
Multi risk scenarios modelled |
Level of severity reviewed
|
Link to principal risk | ||
Contamination issue with one of our products leading to lower sales of products of this brand and the temporary closure of our largest sourcing unit.
|
A fine equal to 1% of Group turnover was considered along with damage to our largest brand and disruption to supply chain. | • Safe and high-quality products • Brand preference • Supply chain | ||
Major global incident affecting one or more of the Group’s key locations resulting in an outage for a year in a key sourcing unit and significant water shortages in our key developing markets. |
The complete loss of all of our turnover in our largest geographic market was considered along with destruction of a key sourcing unit and reduced demand for our products that require water. | • Economic and political instability • Supply chain • Climate change | ||
Lack of progress against our plastic packaging ambitions and the loss of our three largest customers. |
Significant reputational damage was considered with the impact of losing our three key customers. | • Plastic packaging • Brand preference • Customer
|
Findings
• | Firstly, a three-year period is considered appropriate for this viability assessment because it is the period covered by the strategic plan and it enables a high level of confidence in assessing viability, even in extreme adverse events, due to a number of factors such as: |
• | the Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world; |
• | high cash generation by the Group’s operations and access to the external debt markets; |
• | flexibility of cash outflow with respect to significant marketing programmes and capital expenditure projects which usually have a two to three year horizon; and |
• | the Group’s diverse product and geographical activities which are impacted by continuously evolving technology and innovation. |
• | Secondly, the Group’s debt headroom and funding profile has been assessed: |
• | the Group has a healthy balance of short-term and long-term debt programmes, with repayment profiles ensuring short-term commercial paper maturities do not exceed €0.5 billion in any given week and long-term debt maturities do not exceed €4 billion in any given year; and |
• | the Group has $7.865 billion of committed credit facilities with a maturity of 364 days which are used for backing up our commercial paper programmes. |
• | Thirdly, for each of our 14 principal risks, worst case plausible scenarios have been assessed together with multiple risk scenarios. None of the scenarios reviewed, either individually or in aggregate would cause Unilever to cease to be viable. |
Conclusion
On the basis described above, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.
34 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Principal risk factors
Our business is subject to risks and uncertainties. On the following pages we have identified the risks that we regard as the most relevant to our business. These are the risks that we see as most material to Unilever’s business and performance at this time. There may be other risks that could emerge in the future. Our principal risks include risks that could impact our business in the short-term (i.e. the next two years), medium term (i.e. the next three to ten years) or over the longer term (i.e. beyond ten years).
The most significant emerging risk is the ongoing outbreak of the Coronavirus (COVID-19). We are monitoring the situation carefully as it evolves to understand the potential impact on our people and our business. Based on the current position there will be a significant impact on the short-term performance of our Chinese business in 2020, in particular our food service business. There may also be impacts in other countries although the extent is not yet clear. We are taking all necessary steps to protect our people and mitigate the risk to our business.
Our principal risks have not fundamentally changed this year. We no longer show Sustainability as a specific standalone risk reflecting the ongoing integration of sustainability into our business and a realisation over the last couple of years that we need to be more granular in explaining what is meant by a sustainability risk and have hence separated out specific sustainability risks, notably Climate Change and Plastic Packaging. This year we are also separating out a risk with respect to Inequality, which was previously included in our overarching Sustainability risk and is now included within our Ethical risk. In addition, we have reassessed our Financial risks and believe our principal risk in this area should focus more on the changing global tax landscape and its impact on our business, and less on the risks related to our pension liabilities as we have made progress in ensuring stability in our pension funding and do not consider the current risk level to be material at this time.
As well as identifying the most relevant risks for our business we reflect on whether we think the level of risk associated with each of our principal risks is increasing or decreasing. There are three areas where we believe there is an increased level of risk:
• | Plastic Packaging: the pressure to reduce the use of plastic, particularly single-use plastic, continues to gain traction with both our consumers and customers, coupled with the rise of countries considering taxes on plastic packaging; |
• | Customers: the retail landscape continues to evolve with a significant proportion of category growth coming from e-commerce and other new channels, so we need to adapt our business models and develop relationships with new customers and make sure our products are appropriate for these channels; and |
• | Business Transformation: the pressure to digitise our business to generate efficiencies and to allow our people to focus on driving growth continues; a significant transformation programme is underway and our ability to effectively manage these transitions is a key short-term risk. |
If the circumstances in these risks occur or are not successfully mitigated, our cash flow, operating results, financial position, business and reputation could be materially adversely affected. In addition, risks and uncertainties could cause actual results to vary from those described, which may include forward-looking statements, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation.
Annual Report on Form 20-F 2019 | 35 |
Our risks continued
36 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 37 |
Our risks continued
38 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 39 |
40 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 41 |
42 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 43 |
44 | Annual Report on Form 20-F 2019 |
Strategic Report |
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Annual Report on Form 20-F 2019 | 45 |
Non-financial information statement
In accordance with sections 414CA and 414CB of the Companies Act 2006 which outline requirements for non-financial reporting, the table below is intended to provide our stakeholders with the content they need to understand our development, performance, position and the impact of our activities with regards to specified non-financial matters. Further information on these matters can be found in our online Sustainable Living Report and Human Rights Report, as well as policy documents contained on our website.
Non-financial matter and relevant sections
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Annual Report page reference
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Environmental matters |
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Relevant sections of Annual Report & Accounts: | ||
• Tackling climate change |
• Policy: Pages 19 and 40 to 45 | |
• Rethinking plastic |
• Position and performance: Pages 19, 22 and 42 to 45 | |
• Protecting nature through sustainable sourcing |
• Risk: Page 36 | |
• Pushing for systems change |
• Impact: Pages 19 and 40 to 45 | |
• In focus: Climate change |
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• In focus: Plastic packaging |
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Social and community matters |
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Relevant sections of Annual Report & Accounts: | ||
• Better health and wellbeing |
• Policy: Pages 16 to 18 | |
• Enhancing livelihoods |
• Position and performance: Pages 16 and 22 | |
• Safety and wellbeing |
• Risk: Page 37 | |
• Impact: Pages 16 to 18 | ||
Employee matters |
||
Relevant sections of Annual Report & Accounts: | ||
• The changing world of work |
• Policy: Pages 16 to 17 | |
• Reshaping how we work |
• Position and performance: Pages 16 to 17 and 22 | |
• Safety and wellbeing |
• Risk: Page 37 | |
• Evolving our culture |
• Impact: Pages 16 to 17 | |
Human rights matters |
||
Relevant sections of Annual Report & Accounts: | ||
• Evolving our culture |
• Policy: Pages 16 to 18 | |
• Enhancing livelihoods |
• Position and performance: Pages 16 to 18 and 22 | |
• Risk: Pages 37 and 39 | ||
• Impact: Pages 16 to 18 | ||
Anti-corruption and bribery matters |
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Relevant section of Annual Report & Accounts: | ||
• Acting with integrity |
• Policy: Page 16 | |
• Position and performance: Page 16 | ||
• Risk: Pages 37 and 39 | ||
• Impact: Page 16 | ||
46 | Annual Report on Form 20-F 2019 |
Corporate Governance continued
48 | Annual Report on Form 20-F 2019 |
Governance Report |
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Overview of Executive & Non-Executive Directors
Nils Andersen Chairman
Previous experience: A.P. Moller – Maersk A/S (Group CEO); Carlsberg A/S and Carlsberg Breweries A/S (CEO); European Round Table of Industrialists (Vice-Chairman); Unifeeder S/A (Chairman).
Current external appointments: AKZO Nobel N.V. (Chairman); Faerch Plast (Chairman); Worldwide Flight Services (Chairman). Announced to step down from the Boards of BP Plc and Salling Group A/S in March 2020.
Youngme Moon |
Alan Jope |
Graeme Pitkethly |
Laura Cha | |||
Vice-Chairman/Senior Independent Director |
CEO | CFO | ||||
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Previous experience: Harvard Business School (Chairman and Senior Associate Dean for the MBA Program); Massachusetts Institute of Technology (Professor); Avid Technology (NED); Rakuten Inc (NED). Current external appointments: Mastercard INC (Board Member); Sweetgreen Inc (Board Member); JAND Inc (Board Member); Harvard Business School (Professor). |
Nationality British Age 55, Male. Appointed CEO: January 2019. Appointed Director: May 2019. Attended 6/6 planned Board Meetings and 2/2 ad hoc Board Meetings. Previous experience: Beauty and Personal Care Division (President); Unilever Russia, Africa and Middle East (President); Unilever North Asia (President); SCC and Dressings (Global Category Leader); Home and Personal Care North America (President). Current external appointments: Generation Unlimited (Board Member). |
Nationality British Age 53, Male. Appointed CFO: October 2015. Appointed Director: April 2016. Attended 6/6 planned Board Meetings and 2/2 ad hoc Board Meetings. Previous experience: Unilever UK and Ireland (EVP and General Manager); Finance Global Markets (EVP); Group Treasurer; Head of M&A; FLAG Telecom (VP Corporate Development); PwC. Current external appointments: Pearson Plc (NED); Financial Stability Board Task Force on Climate Related Financial Disclosure (Vice Chair); The 100 Group Main Committee. |
Previous experience: Securities and Futures Commission, Hong Kong (Deputy Chairman); China Securities Regulatory Commission (Vice Chairman); China Telecom Corporation Limited (NED); 12th National People’s Congress of China (Hong Kong Delegate). Current external appointments: HSBC Holdings plc (NED); Hong Kong Exchanges and Clearing Ltd (Non-Executive Chairman); Foundation Asset Management Sweden AB (Senior international adviser); Executive Council of the Hong Kong Special Administrative Region (Non-official member). | |||
Vittorio Colao |
Marijn Dekkers |
Judith Hartmann |
Andrea Jung | |||
Previous experience: Vodafone Group plc (CEO); RCS MediaGroup SpA (CEO); McKinsey & Company (Partner); Finmeccanica Group Services SpA (renamed to Leonardo SpA) (NED); RAS Insurance SpA (merged with Allianz AG) (NED). Current external appointments: Verizon (NED); Bocconi University (Executive Board member); Oxford Martin School (Advisor); General Atlantic (Senior Advisor).
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Previous experience: Bayer AG (CEO); Thermo Fisher Scientific Inc. (CEO). Current external appointments: Novalis LifeSciences LLC (Founder and Chairman); Quanterix Corporation (Director); Georgetown University (member Board of Directors); Foundation for the National Institutes of Health (Director); Cerevel Therapeutics (NED); Ginko Bioworks (Chairman). |
Previous experience: General Electric (various roles); Bertelsmann SE & Co. KGaA (CFO); RTL Group SA (NED); Penguin Random House LLC (NED). Current external appointments: ENGIE Group (Deputy CEO); Suez (NED). |
Previous experience: Avon Products Inc (CEO); General Electric (Board Member); Daimler AG (Board Member). Current external appointments: Grameen America Inc (President and CEO); Apple Inc (NED); Wayfair Inc (NED). | |||
Susan Kilsby |
Strive Masiyiwa |
John Rishton |
Feike Sijbesma | |||
Previous experience: L’Occitane International (NED); Keurig Green Mountain (NED); Coca-Cola HBC AG (NED); Goldman Sachs International (NED); Shire Plc (Chair); Mergers and Acquisitions, EMEA - Credit Suisse (Chair). Current external appointments: Diageo Plc (Senior Independent Director); Fortune Brands Home & Security Inc (NED); BHP Plc (NED). |
Previous experience: Africa Against Ebola Solidarity Trust (Co-Founder and Chairman); Grow Africa (Co-Chairman); Nutrition International (formerly known as Micronutrient Initiative) (Chairman); Rockefeller Foundation (Trustee). Current external appointments: Econet Group (Founder and Group Executive Chairman); International Advisory Board of Bank of America (Board member); Stanford University Advisory Board (Board member); National Geographic Society (Board member). |
Previous experience: Rolls-Royce Holdings plc (CEO); Koninklijke Ahold NV (merged to Koninklijke Ahold Delhaize NV) (CEO, President and CFO); ICA (now ICA Gruppen AB) (NED). Current external appointments: Informa Plc (NED); Serco Group Plc (NED); Associated British Ports Holdings Ltd. (NED); Majid al Futtaim Properties LLC (Board Member). |
Previous experience: Supervisory Board of DSM Nederland B.V. (Chairman); Utrecht University (Supervisory Director); Stichting Dutch Cancer Institute/ Antoni van Leeuwenhoek Hospital NKI/AVL) (Supervisory Director). Current external appointments: Koninklijke DSM NV (CEO and Chairman of the Managing Board); De Nederlandsche Bank NV (Member of the Supervisory Board); High Level Leadership Forum on Competitiveness and Carbon Pricing (Chair); Champion of the Carbon Pricing Leadership Coalition (Co-Chair); Trustees of the World Economic Forum (Board member); Climate Leader for the World Bank Group; Board of the Global Center on Adaptation (Co-Chair). | |||
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Non-Executive Directors
Nils Andersen |
Laura Cha |
Vittorio Colao |
Marijn Dekkers |
Judith Hartmann |
Andrea Jung |
Susan Kilsby |
Strive Masiyiwa |
Youngme Moon |
John Rishton |
Feike Sijbesma | ||||||||||||
Age | 61 | 70 | 58 | 62 | 50 | 60 | 61 | 59 | 55 | 62 | 60 | |||||||||||
Gender | Male | Female | Male | Male | Female | Female | Female | Male | Female | Male | Male | |||||||||||
Nationality | Danish | Chinese | Italian | Dutch / American |
Austrian | American / Canadian |
American / British |
Zimbabwean | American | British | Dutch | |||||||||||
Appointment date | April 2015 |
May 2013 |
July 2015 |
April 2016 |
April 2015 |
May 2018 |
August 2019 |
April 2016 |
April 2016 |
May 2013 |
November 2014 | |||||||||||
Committee membership* | CC, NCGC (Chairman) |
NCGC | CC (Chairman) |
CC, NCGC | AC | CC | AC | CRC (Chairman) |
CRC | AC (Chairman) |
CRC, NCGC | |||||||||||
Leadership of complex global entities | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
Broad Board experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||
Geo-political exposure | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
Financial expertise | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
FMCG/consumer insights | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
Emerging markets experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
Digital insights | ✓ | ✓ | ||||||||||||||||||||
Marketing and sales expertise | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||
Science, technology and innovation expertise | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||
CSR experience | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||
HR and remuneration in international firms | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||
Attendance at planned Board Meetings | 6/6 | 5/6 | 6/6 | 6/6 | 6/6 | 5/6 | 2/2 | 6/6 | 6/6 | 6/6 | 6/6 | |||||||||||
Attendance at ad hoc Board Meetings | 2/2 | 1/2 | 2/2 | 2/2 | 2/2 | 2/2 | 2/2 | 2/2 | 2/2 | 1/2 | 1/2 | |||||||||||
Tenure as at 2019 AGMs | 4 | 6 | 4 | 3 | 4 | 1 | 0 | 3 | 3 | 6 | 5 |
* | AC refers to the Audit Committee; CC refers to the Compensation Committee; CRC refers to the Corporate Responsibility Committee; and NCGC refers to the Nominating and Corporate Governance Committee. |
Annual Report on Form 20-F 2019 | 49 |
Corporate Governance continued
For Alan Jope and Graeme Pitkethly see previous page
Conny Braams |
Marc Engel |
Hanneke Faber |
Fabian Garcia | |||
Chief Digital & Marketing Officer
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Chief Supply Chain Officer | President, Foods & Refreshment | President, North America | |||
Nationality Dutch Age 54, Female |
Nationality Dutch Age 53, Male |
Nationality Dutch Age 50, Female |
Nationality American Age 60, Male | |||
Appointed to ULE January 2020 | Appointed to ULE January 2016 | Appointed to ULE January 2018 | Appointed to ULE January 2020 | |||
Joined Unilever 1990 | Joined Unilever 1990 | Joined Unilever 2018 | Joined Unilever 2019 | |||
Previous Unilever posts include: | Previous Unilever posts include: | Previous posts include: | Previous posts include: | |||
Unilever Middle Europe (EVP); Unilever Benelux (Chair and EVP); Home Care Europe (EVP); Unilever FoodSolutions Asia, Africa and Middle East (EVP); various Unilever marketing and general management roles. Current external appointments: Kröller-Müller Museum (Advisory Board member); Rotterdam School of Management (Advisory Board member); Netherlands Confederation of Industry VNO-NCW (Vice-Chair); FNLI (Vice-Chair). |
Unilever East Africa and Emerging Markets (EVP); Chief Procurement Officer; Supply Chain, Spreads, Dressings and Olive Oil Europe (VP); Ice Cream Brazil (Managing Director); Ice Cream Brazil (VP); Corporate Strategy Group; Birds Eye Wall’s, Unilever UK (Operations Manager). Current external appointments: A. P. Møller Mærsk (Supervisory Board member). |
Royal Ahold Delhaize (CEIO & EC member); Royal Ahold (CCO & EC member); P&G (VP & GM). Previous Unilever posts include: Europe (President). Current external appointments: Bayer AG (Supervisory Board member); Food Drink Europe (Board member); Leading Executives Advancing Diversity (LEAD) (Advisory Board member); Pepsi/ Lipton JV (Board member). |
Revlon (President and CEO); Colgate Palmolive (COO; President of the Asia/ Pacific Division, EVP Latin America); P&G (President of Asia Pacific, General Manager of Venezuela). Current external appointments: Council of Foreign Relations in the US (member). | |||
Sunny Jain |
Sanjiv Mehta |
Leena Nair |
Nitin Paranjpe | |||
President, Beauty & Personal Care | President, Unilever, South Asia and Chair and Managing Director, Hindustan Unilever
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Chief HR Officer | Chief Operating Officer | |||
Nationality Canadian Age 44, Male |
Nationality Indian Age 59, Male |
Nationality Indian Age 50, Female |
Nationality Indian Age 56, Male | |||
Appointed to ULE June 2019 | Appointed to ULE May 2019 | Appointed to ULE March 2016 | Appointed to ULE October 2013 | |||
Joined Unilever 2019 | Joined Unilever 1992 | Joined Unilever 1992 | Joined Unilever 1987 | |||
Previous posts include: | Previous Unilever posts include: | Previous Unilever posts include: | Previous Unilever posts include: | |||
Amazon.com Inc (Head of Core Consumables/FMCG Retail; VP Consumables/FMCG Innovation); P&G US and P&G Canada (various roles in New Business Creation, Marketing, Sales, and Information Technology). Current external appointments: GS1 (Board member). |
Unilever North Africa and Middle East (Chair and Chief Executive Officer); Unilever Philippines Inc. (Chair and Chief Executive Officer); Unilever Bangladesh Limited (Chair and Managing Director). Current external appointments: Board of Indian School of Business (Director); Federation of Indian Chambers of Commerce and Industry (Vice-President); Breach Candy Hospital Trust (Member); South Asia Advisory Board of Harvard Business School (Member); Xynteo’s ‘India 2022’ (Chair); Advisory Network to the High Level Panel for a Sustainable Ocean Economy (Co-Chair). |
HR Leadership and Organisational Development and Global Head of Diversity (SVP); Hindustan Unilever Limited (Executive Director HR); Hindustan Lever (various roles). Current external appointments: BT Plc (NED) |
Foods and Refreshment (President) Home Care (President); Unilever South Asia (EVP) and Hindustan Unilever Limited (CEO); Home and Personal Care India (EVP); Home Care India (VP); senior positions in Laundry and Household Care. | |||
Richard Slater |
Ritva Sotamaa |
Peter Ter Kulve |
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Chief R&D Officer | Chief Legal Officer & Group Secretary
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President, Home Care | ||||
Nationality British Age 42, Male |
Nationality Finnish Age 56, Female |
Nationality Dutch Age 55, Male |
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Appointed to ULE April 2019 | Appointed to ULE February 2013 | Appointed to ULE May 2019 | ||||
Joined Unilever 2019 | Joined Unilever 2013 | Joined Unilever 1988 | ||||
Previous posts include: | Previous posts include: | Previous Unilever posts include: | ||||
GSK (Head of R&D, Consumer Healthcare); Reckitt Benckiser (Head of R&D, Consumer Healthcare); Reckitt Benckiser (Global Group Director / VP R&D Personal Care; Global Director R&D Aircare, Analgesics and New Brands); Boots Healthcare (various roles). | Siemens AG – Siemens Healthcare (GC); General Electric Company – GE Healthcare (various positions including GE Healthcare Systems (GC)); Instrumentarium Corporation (GC). Current external appointments: Fiskars Corporation (NED). |
Unilever South East Asia & Australasia (President) and Chief Digital Transformation & Growth Officer; EVP Corporate Transformation; Unilever Benelux (Chair and EVP); Unilever Ice Cream (Global Head & EVP); various Brand and Channel Management roles. | ||||
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50 | Annual Report on Form 20-F 2019 |
Governance Report |
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Annual Report on Form 20-F 2019 | 51 |
Corporate Governance continued
Our shareholders
52 | Annual Report on Form 20-F 2019 |
Governance Report |
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Annual Report on Form 20-F 2019 | 53 |
Governance Report |
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Annual Report on Form 20-F 2019 | 55 |
Governance Report |
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Annual Report on Form 20-F 2019 | 57 |
Governance Report |
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Annual Report on Form 20-F 2019 | 59 |
Governance Report |
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Annual Report on Form 20-F 2019 | 61 |
Directors’ remuneration report continued
How we take into account the views of employees and the level of support in society
62 | Annual Report on Form 20-F 2019 |
Governance Report |
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Adjusted performance ranges for inflight MCIP/GSIP plans, following the adjustments explained on page 62 (see page 68 for the changes for MCIP 2019-2022).
2017-2020 MCIP
Annual Report on Form 20-F 2019 | 63 |
Directors’ remuneration report continued
Annual report on remuneration
This section sets out how Unilever’s remuneration policy (which was approved by shareholders at the May 2018 AGMs and is available on our website) was implemented in 2019, and how it will be implemented in 2020.
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www.unilever.com/remuneration-policy |
Implementation of the remuneration policy for Executive Directors
The remuneration of our Executive Directors was set in line with the principles for remuneration of the Group. Reward should support our business strategy and should be sufficient to attract and retain high-performing individuals without paying more than necessary. Being able to share in the success of Unilever is important across the workforce. The Executive Directors, other members of the ULE and most Unilever employees are rewarded on the basis of the same performance measures for the annual bonus. This helps drive a shared culture and alignment with Unilever’s purpose, strategy and values and allows employees to share in the same success as the most senior employees in Unilever. In addition, all of our management are invited to participate in the MCIP on similar terms to the conditions that apply to the Executive Directors. Further, all our other employees can participate in our ‘buy three, get one for free’ SHARES plan to drive an owner’s mentality throughout the organisation.
The CEO and CFO have the highest proportion of variable pay as they have the highest levels of responsibility. In addition, other employees’ bonuses are also determined by their individual performance whilst the CEO and CFO have no personal performance multiplier, thus making Unilever and Executive Director performance intrinsically connected.
Elements of remuneration
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Fixed Pay |
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Purpose and link to strategy |
Supports the recruitment and retention of Executive Directors of the calibre required to implement our strategy. Reflects the individual’s skills, experience, performance and role within the Group. Provides a simple competitive alternative to the separate provision of salary, fixed allowance and pension. | |||
At a glance |
Details of the rationale for our Executive Directors’ Fixed Pay amounts can be found on page 60. | |||
Implementation in 2019 |
Effective from January 2019: • CEO: €1,450,000 | |||
• | CFO: €1,102,874 | |||
Planned for 2020 |
Effective from January 2020: • CEO: 4% increase to €1,508,000 | |||
• | CFO: 3% increase to €1,135,960 | |||
The Fixed Pay increase for Alan is slightly higher than the 3.6% increase for the wider workforce to reflect his performance and progression in role and conservative positioning against market on appointment. The Fixed Pay increase for Graeme is slightly below that provided to the wider workforce | ||||
Annual Bonus |
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Purpose and link to strategy |
Incentivises year-on-year delivery of rigorous short-term financial, strategic and operational objectives selected to support our annual business strategy and the ongoing enhancement of shareholder value. | |||
The ability to recognise performance through an annual bonus enables us to manage our cost base flexibly and react to events and market circumstances. | ||||
At a glance |
• | Target annual bonus of 150% of Fixed Pay for the CEO and 120% of Fixed Pay for the CFO. | ||
• | Business Performance Multiplier of between 0% and 150% based on achievement against business targets over the year. | |||
• | Performance target ranges are considered to be commercially sensitive and will be disclosed in full with the corresponding performance outcomes retrospectively following the end of the relevant performance year. | |||
• | Maximum annual bonus is 225% of Fixed Pay for the CEO and 180% for the CFO. | |||
• | Subject to ultimate remedy/malus and claw-back provisions. | |||
Implementation in 2019 |
Implemented in line with the 2018 remuneration policy, with performance measures weighted as follows: • Underlying Sales Growth: 1/3 | |||
• | Underlying Operating Margin Improvement: 1/3 | |||
• | Free Cash Flow Growth: 1/3 | |||
Planned for 2020 |
The performance measures for 2020 will remain the same; however, the weight attached to each performance measure will change to reflect management’s focus on delivering growth as a key priority for 2020: | |||
• | Underlying Sales Growth: 50% | |||
• | Underlying Operating Margin Improvement: 25% | |||
• | Free Cash Flow Growth: 25% | |||
Long-term Incentive (MCIP) | ||||
Purpose and link to strategy |
The MCIP encourages senior management to invest their own money into Unilever shares, aligning their interests with shareholders by focusing on the sustained delivery of high performance results over the long term. | |||
At a glance |
• | Executive Directors are required to invest a minimum of 33% and a maximum of 67% of their bonus into MCIP. Investment is made out of after tax income, so investing 67% of gross bonus would require an investment of more than the total net bonus received. | ||
• | Matching shares are awarded based on performance up to a maximum of 3 x matching shares. | |||
• | MCIP award to be made on 24 April 2020, vesting 15 February 2024 (with a requirement to hold vested matching shares for a further one-year retention period). | |||
• | Alan Jope and Graeme Pitkethly both elected to invest the maximum value of their 2019 bonus into MCIP investment shares, giving a maximum value from the matching shares for the CEO of €3,584,835 and for the CFO of €2,181,308. | |||
• | Subject to ultimate remedy/malus and claw-back provisions. |
64 | Annual Report on Form 20-F 2019 |
Governance Report |
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Elements of remuneration
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Implementation in 2019 |
No vesting of MCIP shares due to the extension in performance period following the approval of the remuneration policy. Details of the 2019 MCIP awards can be found on page 68. | |||||||
Performance update on Sustainability Progress Index (SPI) for MCIP year 2019 (based on 2018 USLP performance): | ||||||||
The SPI is a two-fold assessment by the Corporate Responsibility Committee and the Compensation Committee that captures quantitative and qualitative elements (see page 57). For 2019, the Corporate Responsibility Committee and Compensation Committee agreed a framework for SPI assessment for the 2018 performance year that captures the breadth and depth of the USLP in relation to a number of key performance indicators (KPIs). These KPIs illustrate how Unilever aims to address a number of its principal risks such as brand preference, climate change, supply chain and ethics (see Our risks on page 35). | ||||||||
The Committees reviewed qualitative and quantitative progress across each category and delivery against the KPIs. The Committees agreed on a SPI achievement level against the KPI taking into account performance across the entire SPI Category. | ||||||||
The assessment of the Committees is summarised in the following table: | ||||||||
USLP Big Goal (see page 22)/ SPI Category |
KPIs | SPI Category Assessment | ||||||
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1) | Health & Wellbeing | Dove: Help young people build up positive body confidence and self-esteem through educational programmes. | Over-achieved | |||||
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2) | Environmental Impact | CO2: Reduce emissions from energy from factories per tonne of production. | Over-achieved | |||||
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3) | Enhancing Livelihoods | Responsible Sourcing Policy (RSP): Source our procurement spend from suppliers meeting the mandatory requirements of the RSP.
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Achieved | |||||
Accident Rate: Reduce the total recordable frequency rate (TRFR) for accidents in factories and offices. | Achieved | |||||||
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4) | Transformational Change | Sustainable Palm Oil: Purchase crude palm oil from physically certified sustainable sources by 2019. | Over-achieved | |||||
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5) | Ratings & Rankings | Achieve top ratings in a range of leading sustainability rankings and indices. | Achieved | |||||
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Overall SPI Outcome | 125% | |||||||
The Committee’s annual SPI ratings will be tallied as an average SPI index for each four-year MCIP performance period. | ||||||||
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Planned for 2020 |
Performance conditions are assessed over a four-year period. The performance conditions and target ranges for 2020 awards under MCIP will be as follows: | |||||||
MCIP 2020 awards – 2023 awards | ||||||||
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* SPI for MCIP year 2020: Plastic packaging will be an additional KPI for the 2019 performance on USLP (2020 SPI). | ||||||||
Performance at threshold results in no matching shares being awarded, target performance results in an award of 1.5 x matching shares, up to a maximum award of 3 x matching shares, with straight-line vesting between threshold and maximum. Participants are required to hold all their own investment shares and remain employed by Unilever for the duration of the relevant performance period. | ||||||||
The USG targets have increased by +50bps p.a. which reflect our continued top line growth ambitions. | ||||||||
The ROIC targets are set taking into account both IFRS 16 and the Horlicks acquisition, as disclosed elsewhere on page 62. | ||||||||
The target range for Underlying Earnings Per Share Growth has been reduced by 2% at the top end from the MCIP 2019-2022 cycle. When setting this target, the Committee believe that delivering 8% CAGR in EPS over the next four years would be an exceptional achievement and is a suitable stretch target. This target assumes a stronger Underlying Sales Growth performance, a more moderate benefit from operating leverage than seen in prior years as we reach our strategic margin ambition, and continues to reflect the increasing effect of exchange rate volatility in delivering current currency Underlying EPS growth over a four-year plan cycle. Historically FX has been a headwind on EPS, and unlike some peers our EPS targets are not adjusted to remove FX impacts. We also wish to reiterate that our MCIP plan pays out at 0% for threshold performance, with a straight-line vesting schedule up to maximum. Considering these factors in the round the Committee believe a target of 5% CAGR and a stretch of 8% CAGR to be appropriate. |
In addition to the three elements mentioned above, our Executive Directors are provided with non-monetary benefits to aid attraction and retention. These include medical insurance cover, actual tax return preparation costs and provision of death-in-service benefits and administration.
Annual Report on Form 20-F 2019 | 65 |
Directors’ remuneration report continued
Ultimate remedy/malus and claw-back
Grants under MCIP and the legacy GSIP are subject to ultimate remedy as explained in the remuneration policy. Malus and claw-back apply to all performance-related payments as explained in the remuneration policy.
In 2019, the Committee did not reclaim or claw back any of the value of awards of performance-related payments to current or former Executive Directors.
Single figure of remuneration and implementation of the remuneration policy in 2019 for Executive Directors
The table below shows a single figure of remuneration for each of our Executive Directors for the years 2018 and 2019.
Alan Jope CEO(a) (€’000) | Graeme Pitkethly CFO (€’000) | |||||||||||||||||||||||||||||||
2019 | Proportion of Fixed and Variable Rem |
2018 | Proportion of Fixed and Variable Rem |
2019 | Proportion of Fixed and Variable Rem |
2018 | Proportion of Fixed and Variable Rem |
|||||||||||||||||||||||||
(A) Fixed Pay (b) |
1,450 | N/A | 1,103 | 1,058 | ||||||||||||||||||||||||||||
Total Fixed Pay |
1,450 | N/A | 1,103 | 1,058 | ||||||||||||||||||||||||||||
(B) Other Benefits |
41 | N/A | 27 | 26 | ||||||||||||||||||||||||||||
Fixed Pay & Benefits sub total |
1,491 | 30.5% | N/A | N/A | 1,130 | 26.0% | 1,084 | 21.5% | ||||||||||||||||||||||||
(C) STI: Annual Bonus |
1,784 | N/A | 1,085 | 1,006 | ||||||||||||||||||||||||||||
(D) LTI: GSIP Performance Shares |
1,619 | (d) | N/A | 2,132 | 2,267 | |||||||||||||||||||||||||||
LTI: MCIP Match Shares(c) |
N/A | N/A | N/A | 683 | ||||||||||||||||||||||||||||
Variable Remuneration sub total |
3,403 | 69.5% | N/A | N/A | 3,217 | 74.0% | 3,956 | 78.5% | ||||||||||||||||||||||||
LTI Sub total |
1,619 | N/A | 2,132 | 2,950 | ||||||||||||||||||||||||||||
Total Remuneration - (Required by UK Law) (A+B+C+D) |
4,894 | N/A | 4,347 | 5,040 | ||||||||||||||||||||||||||||
(E) Share awards (required by Dutch law) |
1,244 | N/A | 1,522 | 1,774 | ||||||||||||||||||||||||||||
Total Remuneration - (Required by Dutch Law) (A+B+C+E) |
4,519 | N/A | 3,737 | 3,864 |
(a) | Alan Jope was appointed CEO as from 1 January 2019, but only became an Executive Director on 2 May 2019 at the close of the AGMs. However, for comparison purposes going forward, we disclose his remuneration for the full 2019 year. |
(b) | From May 2018 Fixed Pay replaces salary, fixed allowance and pensions following the implementation of our new Reward Framework for our Executive Directors. |
(c) | In 2017 we extended the performance period of our MCIP plan from 3 years to 4 years, as such there was no MCIP vesting at the end of 2019. |
(d) | Alan Jope’s GSIP values in the above single figure table include GSIP performance shares previously granted to him in 2017 before his appointment as an Executive Director, and include tax and social security. |
Where relevant, amounts for 2019 have been translated into euros using the average exchange rate over 2019 (€1 = £0.8799), excluding amounts in respect of GSIP calculated for UK purposes, which have been translated into euros using the exchange rate at vesting date of 13 February 2020 (€1 = £0.8390). Amounts for 2018 have been translated into euros using the average exchange rate over 2018 (€1 = £0.8835), excluding amounts in respect of MCIP and GSIP calculated for UK purposes, which have been translated into euros using the exchange rate at vesting date of 11 February 2019 (€1 = £0.8784).
We do not grant our Executive Directors any personal loans or guarantees.
Elements of single figure remuneration 2019
(A) Fixed Pay
Fixed Pay set in euros and paid in 2019: CEO – €1,450,000 CFO – €1,102,874
(B) Other benefits
For 2019 this comprises:
Alan Jope CEO (€)(a) |
Graeme Pitkethly CFO (€)(a) |
|||||||
2019 | 2019 | |||||||
Medical insurance cover and actual tax return preparation costs |
25,816 | 17,754 | ||||||
Provision of death-in-service benefits and administration |
14,941 | 9,493 | ||||||
Total |
40,757 | 27,247 |
(a) | The numbers in this table are translated where necessary using the average exchange rate over 2019 of €1 = £0.8799. |
(C) Annual bonus
Annual bonus 2019 actual outcomes: CEO – €1,783,500 (which is 55% of maximum, 123% of Fixed Pay). CFO – €1,085,228 (which is 55% of maximum, 98% of Fixed Pay).
Annual bonus measures are not impacted by share price growth.
66 | Annual Report on Form 20-F 2019 |
Governance Report |
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(C) Annual bonus continued
The annual bonus includes cash and the portion of annual bonus that Executive Directors have indicated will be re-invested in shares under the MCIP (satisfying the requirement to invest at least 33%). See below for details. Performance measure ranges have been adjusted to reflect the adjustments made by the Committee highlighted on page 62 in the Committee’s Chair letter. Performance against targets:
Further details of the annual bonus outcomes are described in the Committee’s Chair letter on page 60. The calculated pay-out for Unilever’s 2019 performance ratio of 82% was endorsed by the Committee as representing a balanced assessment of underlying performance of the business.
(D) GSIP – UK law requirement
2019 Outcomes
This includes GSIP performance shares (operated under the Unilever Share Plan 2017) granted on 13 February 2017, based on performance in the three-year period to 31 December 2019, which vested on 13 February 2020.
The values included in the single figure table for 2019 are calculated by multiplying the number of shares granted on 13 February 2017 (including additional shares in respect of accrued dividends through to 31 December 2019) by the level of vesting (119% of target award) and the share price on the date of vesting (NV €54.70 and PLC £46.12, NV NY $59.45 and PLC ADR $60.53). These have been translated into euros using the exchange rate on the date of vesting (€1 = £0.8390 and €1 = $1.0877).
Performance measure ranges have been adjusted to reflect the adjustments made by the Committee highlighted on page 62 of the Committee’s Chair letter. Performance against targets:
(a) | For the relative TSR measure, Unilever’s TSR is measured against a comparator group of other consumer goods companies. TSR measures the return received by a shareholder, capturing both the increase in share price and the value of dividend income (assuming dividends are reinvested). The TSR results are measured on a common currency basis to better reflect the shareholder experience. The current TSR peer group consists of 18 companies (19 including Unilever) as follows: Avon, Beiersdorf, Campbell Soup, Coca-Cola, Colgate-Palmolive, Danone, General Mills, Estée Lauder, Henkel, Kao, Kellog’s, Kimberly-Clark, L’Oréal, Nestlé, PepsiCo, Procter & Gamble, Reckitt Benckiser, Shiseido. The Committee may change the TSR vesting levels set out above if the number of companies in the TSR comparator group changes (eg via M&A activity etc). |
Further details of the GSIP outcomes are described in the Committee’s Chair letter on page 60.
On the basis of this performance, the Committee determined that the GSIP awards to the end of 2019 will vest at 119% of initial target award levels (i.e. 60% of maximum for GSIP).
Annual Report on Form 20-F 2019 | 67 |
Directors’ remuneration report continued
(D) GSIP – UK law requirement continued
(a) | The conditional number of shares awarded (including decimals) at the share price on the award date. |
(b) | The business performance ratio applied to the original conditional share award (including decimals) at the share price on the award date. |
(c) | The dividends accrued on the original conditional share award (including decimals) at the share price on the award date. |
(d) | The nominal movement in share price between the award date and the vesting date applied to the original conditional share award plus accrued dividends (including decimals) multiplied by the business performance ratio. |
(e) | The final value of the award on the vesting date using the average exchange rate over 2019 of €1 = £0.8799 and €1= $1.1203. The actual number of vested shares can be found on page 69. The share values for Alan Jope are grossed up for tax and social security. |
(E) Share Awards- Dutch law requirement
As per the Dutch requirements, these costs are non-cash costs and relate to the expenses recognised for the period following IFRS 2. This is based on share prices on grant dates and a 98% adjustment factor for GSIP shares awarded in 2018, 2017 and 2016. For MCIP shares awarded in 2019, 2018 and 2017, there has been no adjustment factor applied.
Scheme interests awarded in the year
MCIP Plan Conditional matching share award made on 23 April 2019 | ||
Basis of award |
Based on the level of 2018 annual bonus paid in 2019 invested by the CEO and CFO. The following numbers of matching shares were awarded on 23 April 2019 (vesting on 9 February 2023)(a): | |
CEO: | ||
• PLC – 0 | ||
• NV – 16,668 | ||
CFO: | ||
• PLC – 19,196 | ||
• NV – 0 | ||
Maximum vesting results in 200% of the above awards vesting. | ||
Maximum face value |
• CEO: €1,748,991(b) | |
of awards |
• CFO: €1,975,705(b) | |
Threshold vesting
|
Four equally weighted long-term performance measures. 0% of the target award vests for threshold performance. | |
Performance period
|
1 January 2019 – 31 December 2022 (with a requirement to hold vested matching shares for a further one-year retention period).
| |
Details of performance measures |
Performance measure ranges have been adjusted to reflect the adjustments made by the Committee highlighted on page 62 of the Committee’s Chair letter: | |
MCIP 2019 – 2022 awards | ||
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(a) | Under MCIP, Executive Directors invest in NV or PLC shares, and receive a corresponding number of performance-related matching shares. On 23 April 2019, the CEO and the CFO invested the maximum value of their 2018 annual bonus in MCIP investment shares (Alan Jope elected to receive NV shares only and Graeme Pitkethly elected to receive PLC shares only, in line with the share choice provisions in operation at the time). |
(b) | Face values are calculated by multiplying the number of shares granted on 23 April 2019 (including decimals) by the share price on that day of PLC £45.28 and NV €52.47 respectively, assuming maximum performance and therefore maximum vesting of 200% for MCIP and then translating into euros using an average exchange rate over 2019 of €1 = £0.8799. |
68 | Annual Report on Form 20-F 2019 |
Governance Report |
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Minimum shareholding requirement and Executive Director share interests
The remuneration arrangements applicable to our Executive Directors require them to build and retain a personal shareholding in Unilever within five years of their date of appointment to align their interests with those of Unilever’s shareholders. Incoming Executive Directors will be required to retain all shares vesting from any share awards made since their appointment until their minimum shareholding requirements have been met in full.
The table below shows the Executive Directors’ share ownership against the minimum shareholding requirements as at 31 December 2019 and the interest in NV and PLC ordinary shares of the Executive Directors and their connected persons as at 31 December 2019.
When calculating an Executive Director’s personal shareholding the following methodology is used:
• | Fixed Pay at the date of measurement. |
• | Shares in either PLC or NV (or a combination of both) will qualify provided they are personally owned by the Executive Director, by a member of his (immediate) family or by certain corporate bodies, trusts or partnerships as required by law from time to time (each a ‘connected person’). |
• | Shares purchased under the MCIP, whether from the annual bonus or otherwise, will qualify as from the moment of purchase as these are held in the individual’s name and are not subject to further restrictions. |
• | Shares or entitlements to shares that are subject only to the Director remaining in employment will qualify on a net of tax basis. |
• | Shares awarded on a conditional basis by way of the GSIP or MCIP will not qualify until the moment of vesting (i.e. once the precise number of shares is fixed after the three-year vesting period for the GSIP, or a four-year vesting period for the MCIP, has elapsed). |
• | The shares will be valued on the date of measurement or, if that outcome fails the personal shareholding test, on the date of acquisition. |
The share price for the relevant measurement date will be based on the average closing share prices and the euro/sterling/US dollar exchange rates from the 60 calendar days prior to the measurement date.
Executive Directors are required to hold shares to the value of 100% of their shareholding requirement for 12 months post cessation of employment at Unilever, and 50% of these shares for 24 months post cessation of employment with Unilever. ULE members are required to build a shareholding of 400% of Fixed Pay (500% for the CEO). This requirement is 150% of Fixed Pay for the ‘Top 75’ management layer below ULE.
Executive Directors’ and their connected persons’ interests in shares and share ownership
Share ownership guideline as |
Shares held as at | Shares held as at | ||||||||||||||||||||||||||||||||||||||||||
1 January 2019(b) | 31 December 2019(b) | |||||||||||||||||||||||||||||||||||||||||||
Have guidelines been met (as at 31 December 2019) |
Actual share ownership as |
NV | PLC | NV NY | PLC ADR | NV | PLC | NV NY | PLC ADR | |||||||||||||||||||||||||||||||||||
CEO: Alan Jope |
500% | Yes | 775% | 0 | 0 | 129,561 | 44,534 | 11,112 | 0 | 151,141 | 49,197 | |||||||||||||||||||||||||||||||||
CFO: Graeme Pitkethly |
400% | Yes | 740% | 35,340 | 73,495 | 0 | 0 | 39,535 | 114,355 | 0 | 0 |
(a) | Calculated based on the minimum shareholding requirements and methodology set out above and the headline Fixed Pay for the CEO and CFO as at 31 December 2019 (€1,450,000 for the CEO and €1,102,874 for the CFO). |
(b) | NV shares are ordinary €0.16 shares and PLC shares are ordinary 31/9p shares. |
During the period between 31 December 2019 and 20 February 2020, the following changes in interests have occurred:
• | Graeme Pitkethly purchased 5 PLC shares under the PLC ShareBuy Plan: 3 on 9 January 2020 at a share price of £42.74, and a further 2 on 10 February 2020 at a share price of £46.61; and |
• | as detailed under headings (D) on page 67, on 13 February 2020: |
• | Alan Jope acquired 13,988 NV NY shares following the vesting of his 2017 GSIP award; and |
• | Graeme Pitkethly acquired 36,988 PLC shares following the vesting of his 2017 GSIP award. |
The voting rights of the Directors (Executive and Non-Executive) and members of the ULE who hold interests in the share capital of NV and PLC are the same as for other holders of the class of shares indicated. As at 20 February 2020 none of the Directors’ (Executive and Non-Executive) or other ULE members’ shareholdings amounted to more than 1% of the issued shares in that class of share. All shareholdings in the table above are beneficial. On page 51 the full share capital of NV and PLC has been described. Page 103 and 104 set out how many shares Unilever held to satisfy the awards under the share plans.
Information in relation to outstanding share incentive awards
As at 31 December 2019, Alan Jope held awards over a total of 53,314 shares which are subject to performance conditions, and Graeme Pitkethly held awards over a total of 115,708 shares which are subject to performance conditions. There are no awards of shares without performance conditions and no awards in the form of options.
Annual Report on Form 20-F 2019 | 69 |
Directors’ remuneration report continued
Management Co-Investment Plan
The following conditional shares vested during 2019 or were outstanding at 31 December 2019 under the MCIP:
Balance of conditional shares at January 2019 |
Conditional shares awarded in 2019(a) |
Balance of conditional shares at 31 December 2019 |
||||||||||||||||||||||||||||||||||
Share type |
No. of shares |
Performance period 1 January 2019 to 31 December 2022 |
Price award |
Dividend shares accrued during the year(d) |
Vested in 2019(e) |
Price at vesting |
Additional shares earned in 2019(f) |
No. of shares |
||||||||||||||||||||||||||||
NV | 0 | 16,668 | €52.47 | 382 | 0 | 0 | 17,050 | |||||||||||||||||||||||||||||
NV NY | 27,241(b) | 0 | 735 | 4,489 | $54.73 | 1,088 | 24,575 | |||||||||||||||||||||||||||||
Alan Jope |
PLC ADR | 3,403(b) | 0 | 0 | 4,492 | $54.00 | 1,089 | 0 | ||||||||||||||||||||||||||||
NV | 23,739(c) | 0 | 566 | 7,057 | €48.55 | 1,711 | 18,959 | |||||||||||||||||||||||||||||
Graeme Pitkethly |
PLC | 23,819(c) | 19,196 | £45.28 | 1,005 | 7,118 | £42.06 | 1,726 | 38,628 |
(a) | On 23 April 2019, Alan Jope and Graeme Pitkethly each invested in MCIP the maximum value of their annual bonus earned during 2018 and paid in 2019, and received a corresponding award of 1.5 x matching shares (which will vest, subject to performance, on 9 February 2023). Alan Jope chose to receive NV shares, and Graeme Pitkethly chose to receive PLC shares. |
(b) | This includes grants that were made to Alan Jope before his appointment as CEO as per 1 January 2019, being a grant of 3,123 of each NV NY and PLC ADR shares made on 11 February 2016 (which vested on 11 February 2019), a grant of 8,607 NV NY shares made on 17 May 2017 (vesting on 16 February 2021), a grant of 14,454 NV NY shares made on 23 April 2018 (vesting on 16 February 2022), and 1,057 NV NY shares and 280 PLC ADR shares from reinvested dividends accrued in prior years in respect of awards. |
(c) | This includes a grant of 4,912 of each NV and PLC shares made on 11 February 2016 (which vested on 11 February 2019), a grant of 5,423 of each NV and PLC shares made on 17 May 2017 (vesting on 16 February 2021), a grant of 12,408 of each NV and PLC shares made on 3 May 2018 (vesting on 16 February 2022), and 996 NV shares and 1,076 PLC shares from reinvested dividends accrued in prior years in respect of awards. |
(d) | Reflects reinvested dividend equivalents accrued during 2019 and subject to the same performance conditions as the underlying matching shares. |
(e) | The 11 February 2016 grant vested on 11 February 2019 at 132% for both Alan Jope and Graeme Pitkethly. |
(f) | This includes the additional shares earned and accrued dividends as result of a business performance multiplier on vesting above 100%. |
Global Share Incentive Plan
The following conditional shares vested during 2019 or were outstanding at 31 December 2019 under the GSIP:
Balance of conditional shares at January 2019 (a) |
Balance of conditional shares at 31 December 2019 |
|||||||||||||||||||||||||||
Share type |
No. of shares |
Dividend year(d) |
Vested
in 2019(e) |
Price at vesting |
Additional shares earned in 2019(f) |
No. of shares |
||||||||||||||||||||||
NV NY | 12,038(b) | 175 | 8,409 | $54.73 | 2,038 | 5,842 | ||||||||||||||||||||||
Alan Jope |
PLC ADR | 12,048(b) | 174 | 8,416 | $54.00 | 2,041 | 5,847 | |||||||||||||||||||||
NV | 45,883(c) | 866 | 23,413 | €48.55 | 5,675 | 29,011 | ||||||||||||||||||||||
Graeme Pitkethly |
PLC | 46,130(c) | 870 | 23,615 | £42.06 | 5,725 | 29,110 |
(a) | In accordance with the remuneration policy adopted by shareholders in May 2018 no GSIP award has been granted after 2018. |
(b) | This includes grants that were made to Alan Jope before his appointment as CEO as per 1 January 2019, being a grant of 5,851 of each NV NY and PLC ADR shares made on 11 February 2016 (which vested on 11 February 2019), a grant of 5,370 of each NV NY and PLC ADR shares made on 13 February 2017 (which vested on 13 February 2020), and 817 NV NY and 827 PLC ADR shares from reinvested dividends accrued in prior years in respect of awards. |
(c) | This includes a grant of 16,297 of each NV and PLC shares made on 11 February 2016 (which vested on 11 February 2019), a grant of 14,171 of each NV and PLC shares made on 13 February 2017 (which vested on 13 February 2020), a grant of 12,772 of each NV and PLC shares made on 16 February 2018 (vesting 17 February 2021), and 2,643 NV shares and 2,890 PLC shares from reinvested dividends accrued in prior years in respect of awards. |
(d) | Reflects reinvested dividend equivalents accrued during 2019, subject to the same performance conditions as the underlying GSIP shares. |
(e) | The 11 February 2016 grant vested on 11 February 2019 at 132% for both Alan Jope and Graeme Pitkethly. In accordance with Unilever’s existing remuneration policy, Executive Directors are able to choose whether they receive any shares due to vest under GSIP in PLC or NV shares or an equal number of shares in each. Alan Jope chose to receive NV shares. Therefore, upon vesting, his 11 February 2016 PLC ADR award was cancelled and converted and delivered to him as 8,511 NV NY shares (resulting in a total vesting for the 11 February grant of 16,920 NV NY shares). Graeme Pitkethly chose to receive PLC shares. Therefore, upon vesting, his 11 February 2016 NV award was cancelled and converted and delivered to him as 23,114 PLC shares, (resulting in a total vesting for the 11 February grant of 46,729 PLC shares). |
(f) | This includes the additional shares earned and accrued dividends as result of a business performance multiplier on vesting above 100%. |
Executive Directors’ service contracts
Starting dates of our Executive Directors’ service contracts:
• Alan Jope: 1 January 2019 (signed on 5 March 2019); and
• Graeme Pitkethly: 1 October 2015 (signed on 16 December 2015).
Service contracts are available to shareholders to view at the AGMs or on request from the Group Secretary, and can be terminated with 12 months’ notice from Unilever or six months’ notice from the Executive Director. A payment in lieu of notice can be made of no more than one year’s Fixed Pay and other benefits. Other payments that can be made to Executive Directors in the event of loss of office are disclosed in our remuneration policy which is available on our website.
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www.unilever.com/remuneration-policy |
70 | Annual Report on Form 20-F 2019 |
Governance Report |
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Payments to former Directors
The table below shows the 2019 payments to Paul Polman in accordance with arrangements made with him upon his stepping down as CEO on 31 December 2018 and his retirement from employment with Unilever effective 2 July 2019. These arrangements were disclosed in the Director’s remuneration report in the Unilever Annual Report and Accounts 2018.
Paul Polman | (€’000) | |||
Fixed Pay |
859 | |||
Other Benefits(a) |
337 | |||
Pension(b) |
2,255 | |||
GSIP 2017-2019 (pro-rated)(c) |
3,368 | |||
Total Remuneration(d) |
6,819 |
(a) | This includes tax preparation fees, medical, death & disability cover and social security. |
(b) | Distribution of monies paid into a supplemental pension plan during 2010-2018 and associated investment return. The annual contributions were previously reported in the 2010-2018 DRRs. |
(c) | Actual time pro-rated GSIP vesting (79%) on 13 February 2020 of 62,571 NV shares at a closing share price of €54.70. |
(d) | The value of the GSIP 2017-2019 (pro-rated) awards calculated pursuant to Dutch law is €1,526 thousand. Total remuneration in accordance with Dutch law is €4,977 thousand. These costs are non-cash costs and relate to the expenses recognised for the period following IFRS 2. This is based on share prices on grant dates and a 98% adjustment factor for these respective GSIP shares. |
There have been no other payments to former Directors nor have there been any payments for loss of office during the year.
Implementation of the remuneration policy for Non-Executive Directors
The current Non-Executive Director fee levels will be changed for 2020, with an increase of £25,000 for the Chairman fee (4%) and an increase of £3,000 for the fee of the members of the Audit Committee (15%) and for the members of the Compensation Committee (20%). The basic Non-Executive Director fee remains unchanged. We will further review fee levels in the context of the remuneration policy renewal in 2021. The table below outlines the current fee structure with fees set in euros and paid 50% by each of NV (in euros) and PLC (in sterling) shown using an exchange rate of £1 = €1.2817 (rounded) for both years:
Roles and responsibilities | 2020 Annual Fee € | 2019 Annual Fee € | ||||||
Basic Non-Executive Director Fee |
108,949 | 108,949 | ||||||
Chairman (all inclusive) |
833,105 | 801,092 | ||||||
Vice Chairman (modular) |
51,270 | 51,270 | ||||||
Member of Nominating and Corporate Governance Committee |
19,226 | 19,226 | ||||||
Member of Compensation Committee |
23,071 | 19,226 | ||||||
Member of Corporate Responsibility Committee |
19,226 | 19,226 | ||||||
Member of Audit Committee |
29,479 | 25,635 | ||||||
Chair of Nominating and Corporate Governance Committee |
38,452 | 38,452 | ||||||
Chair of Compensation Committee |
38,452 | 38,452 | ||||||
Chair of Corporate Responsibility Committee |
38,452 | 38,452 | ||||||
Chair of Audit Committee |
51,270 | 51,270 |
All reasonable travel and other expenses incurred by Non-Executive Directors in the course of performing their duties are considered to be business expenses. Non-Executive Directors also receive expenses relating to the attendance of their spouse or partner, when they are invited by Unilever.
Single figure of remuneration in 2019 for Non-Executive Directors
The table below shows a single figure of remuneration for each of our Non-Executive Directors, for the years 2018 and 2019.
2019 | 2018 | |||||||||||||||||||||||
Non-Executive Director |
Fees(a) €’000 |
Benefits(b) €’000 |
Total remuneration €’000 |
Fees(a) €’000 |
Benefits(b) €’000 |
Total remuneration €’000 |
||||||||||||||||||
Nils Andersen(c) |
211 | 10 | 220 | 121 | 9 | 130 | ||||||||||||||||||
Laura Cha |
121 | – | 121 | 115 | – | 115 | ||||||||||||||||||
Vittorio Colao(d) |
139 | 33 | 172 | 127 | – | 127 | ||||||||||||||||||
Marijn Dekkers |
673 | 35 | 708 | 744 | 13 | 757 | ||||||||||||||||||
Ann Fudge(e) |
– | – | – | 50 | – | 50 | ||||||||||||||||||
Judith Hartmann |
127 | 19 | 146 | 121 | 7 | 128 | ||||||||||||||||||
Andrea Jung |
121 | – | 121 | 80 | – | 80 | ||||||||||||||||||
Susan Kilsby(f) |
53 | – | 53 | – | – | – | ||||||||||||||||||
Mary Ma(g) |
81 | – | 81 | 115 | – | 115 | ||||||||||||||||||
Strive Masiyiwa(h) |
139 | – | 139 | 131 | – | 131 | ||||||||||||||||||
Youngme Moon(i) |
169 | – | 169 | 147 | – | 147 | ||||||||||||||||||
John Rishton(j) |
151 | 16 | 168 | 143 | – | 143 | ||||||||||||||||||
Feike Sijbesma |
139 | – | 139 | 135 | – | 135 | ||||||||||||||||||
Total |
2,124 | 113 | 2,237 | 2,029 | 29 | 2,058 |
(a) | This includes fees received from NV in euros and PLC in sterling for 2018 and 2019 respectively. Includes basic Non-Executive Director fee and Committee chairmanship and/or membership. Where relevant, amounts for 2018 have been translated into euros using the average exchange rate over 2018 (€1 = £0.8835). Amounts for 2019 have been translated into euros using the average exchange rate over 2019 (€1 = £0.8799). |
(b) | The only benefit received relates to travel by spouses or partners where they are invited by Unilever. |
(c) | Chairman and Chair of the Nominating and Corporate Governance Committee as per November 2019. |
(d) | Chair of the Compensation Committee. |
(e) | Retired from the Boards at the May 2018 AGMs. |
(f) | Appointed at the May 2019 AGMs, with appointment taking effect from 1 August 2019. |
(g) | Passed away on 31 August 2019. |
(h) | Chair of the Corporate Responsibility Committee. |
(i) | Vice Chair and Senior Independent Director. |
(j) | Chair of the Audit Committee. |
We do not grant our Non-Executive Directors any personal loans or guarantees or any variable remuneration, nor are they entitled to any severance payments.
Annual Report on Form 20-F 2019 | 71 |
Directors’ remuneration report continued
Percentage change in remuneration of Non-Executive Directors
The table below shows the five-year history year-on-year percentage change for fees and other benefits for the current Non-Executive Directors.
Total Remuneration(a) | ||||||||||||||||||||||||
Non-Executive Director |
% change from 2018 to 2019 |
% change from 2017 to 2018 |
% change from 2016 to 2017 |
% change from 2015 to 2016 |
% change from 2014 to 2015 |
% change from 2013 to 2014 |
||||||||||||||||||
Nils Andersen |
69.2% | 16.1% | -12.5% | 62.0% | – | – | ||||||||||||||||||
Laura Cha |
5.2% | 7.5% | -10.1% | -2.5% | 20.8% | 62.9% | ||||||||||||||||||
Vittorio Colao |
35.4% | 23.3% | -3.7% | 87.7% | – | – | ||||||||||||||||||
Marijn Dekkers |
-6.5% | 2.3% | 42.6% | – | – | – | ||||||||||||||||||
Judith Hartmann |
14.1% | 14.3% | -8.2% | 52.5% | – | – | ||||||||||||||||||
Andrea Jung |
51.3% | – | – | – | – | – | ||||||||||||||||||
Susan Kilsby |
– | – | – | – | – | – | ||||||||||||||||||
Strive Masiyiwa |
6.1% | 18.0% | 56.3% | – | – | – | ||||||||||||||||||
Youngme Moon |
15.0% | 42.7% | 45.1% | – | – | – | ||||||||||||||||||
John Rishton |
17.5% | 12.6% | -9.3% | 5.3% | 24.3% | 62.1% | ||||||||||||||||||
Feike Sijbesma |
3.0% | 6.3% | -3.8% | 3.9% | 693.8% | – |
(a) | Non-Executive Directors receive an annual fixed fee and do not receive any Company performance related payment. Therefore, the year-on-year % changes are mainly due to changes in committee chair or memberships, mid-year appointments of Non-Executive Directors, fee increases as disclosed in earlier directors’ remuneration reports and changes in the average sterling: euro exchange rates. Marijn Dekkers stepped down as Chairman in November 2019, and was succeeded by Nils Andersen. Feike Sijbesma joined Unilever in November 2014 and therefore his change from 2014 to 2015 shows a larger % change than for a usual mid-year joiner. |
Non-Executive Directors’ interests in shares
Non-Executive Directors are encouraged to build up a personal shareholding of at least 100% of their annual fees over the five years from appointment. The table shows the interests in NV and PLC ordinary shares of Non-Executive Directors and their connected persons as at 31 December 2019 against the minimum shareholding recommendation. There has been no change in these interests between 31 December 2019 and 20 February 2020 (other than Susan Kilsby, who bought 1,250 PLC shares on 20 February 2020 at a share price of £45.67).
Non-Executive Director | Share type |
Shares held at 31 December 2019 |
Actual share ownership as a % of NED fees (as at 31 December 2019) |
|||||||||
Nils Andersen(a) |
NV | 21,014 | 134% | |||||||||
NV | 2,660 | |||||||||||
Laura Cha |
PLC | 858 | 149% | |||||||||
Vittorio Colao |
NV | 5,600 | 206% | |||||||||
Marijn Dekkers |
NV NY | 20,000 | 152% | |||||||||
Judith Hartmann |
NV | 2,500 | 101% | |||||||||
Andrea Jung |
NV | 4,576 | 194% | |||||||||
Susan Kilsby |
- | - | - | |||||||||
NV | 860 | |||||||||||
Mary Ma(b) |
PLC | 1,860 | 173% | |||||||||
Strive Masiyiwa |
PLC | 1,130 | 42% | |||||||||
Youngme Moon |
NV NY | 3,500 | 106% | |||||||||
NV | 3,340 | |||||||||||
John Rishton |
PLC | 2,000 | 181% | |||||||||
Feike Sijbesma |
NV | `10,000 | 369% |
(a) | The shareholding percentage has been measured against the annual all-inclusive Chairman fee for 2019, although Nils Andersen only became Chairman on 13 November 2019. |
(b) | Shares held at 31 August 2019. |
Non-Executive Directors’ letters of appointment
All Non-Executive Directors were reappointed to the Boards at the 2019 AGMs, with the exception of Susan Kilsby (who was appointed for the first time, with her appointment taking effect on 1 August 2019).
Non-Executive Director |
Date first appointed to the Boards |
Effective date of current appointment(a) |
||||||
Nils Andersen | 30 April 2015 | 2 May 2019 | ||||||
Laura Cha | 15 May 2013 | 2 May 2019 | ||||||
Vittorio Colao | 1 July 2015 | 2 May 2019 | ||||||
Marijn Dekkers | 21 April 2016 | 2 May 2019 | ||||||
Judith Hartmann | 30 April 2015 | 2 May 2019 | ||||||
Andrea Jung | 3 May 2018 | 2 May 2019 | ||||||
Susan Kilsby | 1 August 2019 | 1 August 2019 | ||||||
Strive Masiyiwa | 21 April 2016 | 2 May 2019 | ||||||
Youngme Moon | 21 April 2016 | 2 May 2019 | ||||||
John Rishton | 15 May 2013 | 2 May 2019 | ||||||
Feike Sijbesma | 1 November 2014 | 2 May 2019 |
(a) | The unexpired term for all Non-Executive Directors’ letters of appointment is the period up to the 2020 AGMs, as they all, unless they are retiring, submit themselves for annual reappointment. |
72 | Annual Report on Form 20-F 2019 |
Governance Report |
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Other disclosures related to Directors’ remuneration
CEO single figure ten-year history
The table below shows the ten-year history of the CEO single figure of total remuneration for UK purposes:
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||||||||
CEO Single figure of total remuneration (€’000) |
6,292 | 6,010 | 7,852 | 7,740 | 9,561 | 10,296 | 8,370 | 11,661 | 11,726 | 4,894 | ||||||||||||||||||||||||||||||
Annual bonus award rates against maximum opportunity | 80% | 68% | 100% | 78% | 66% | 92% | 92% | 100% | 51% | 55% | ||||||||||||||||||||||||||||||
GSIP performance shares vesting rates against maximum opportunity | 47% | 44% | 55% | 64% | 61% | 49% | 35% | 74% | 66% | 60% | ||||||||||||||||||||||||||||||
MCIP matching shares vesting rates against maximum opportunity | n/a | n/a | n/a | n/a | 81% | 65% | 47% | 99% | 88% | n/a | ||||||||||||||||||||||||||||||
Share Matching Plan shares vesting rates against maximum opportunity(a) | 100% | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
(a) | Shown in year of award. |
Unilever regularly looks at pay ratios throughout the company, and the pay ratio between each work level, and we have disclosed this for a number of years. The table below provides a detailed breakdown of the fixed and variable pay elements for each of our UK and Dutch work levels, showing how each work level compares to the CEO and CFO in 2019 (with equivalent figures from 2018 included for comparison purposes).
CEO/CFO Pay Ratio Comparison (split by fixed/variable pay)
Figures for the CEO and CFO are calculated using the data for UK purposes from the Executive Directors’ single figure table on page 66. Accordingly, the year-on-year comparison reflects the appointment of Alan Jope as CEO in 2019 following Paul Polman’s retirement at the end of 2018. The 2019 numbers reflect that Alan Jope’s Fixed Pay was set at a lower level than Paul Polman’s. The numbers are further impacted by fluctuation in the exchange rates used to convert pay elements denominated in pounds sterling to euros for reporting purposes in 2018. From 2019 the CEO and CFO pay elements are paid in euros. Where relevant, amounts for 2018 have been translated using the average exchange rate over 2018 (€1 = £0.8835), and amounts for 2019 have been translated using the average exchange rate over 2019 (€1 = £0.8799).
Annual bonus and long-term incentives (GSIP and MCIP) for the UK and Dutch employees were not calculated following the statutory method for single-figure pay. Instead, variable pay figures were calculated using:
• | target annual bonus values for the respective year (so disregarding personal performance multipliers, which equal out across the population as a whole); |
• | target GSIP values for the respective year; and |
• | MCIP values calculated at an appropriate average for the relevant Work Level of employees, i.e. an average 45% investment of bonus for WL3 employees; 60% for WL4-5 employees; and 100% for WL6 employees. |
Fixed pay figures reflect all elements of pay (including allowances) and benefits paid in cash.
Annual Report on Form 20-F 2019 | 73 |
Directors’ remuneration report continued
CEO pay ratio comparison
The table below is included to meet UK requirements and shows how pay for the CEO compares to our UK employees at the 25th percentile, median and 75th percentile.
Year | 25th Percentile | Median Percentile |
75th Percentile | Mean Pay Ratio | ||||||
Year ended 31 December 2019 |
Salary: | £38,510 | £45,154 | £59,988 | ||||||
Pay and benefits: | £50,689 | £61,086 | £87,982 | |||||||
Pay ratio (Option A): | 83 | 69 | 48 | 51 | ||||||
Year ended 31 December 2018 |
Salary: | £28,804 | £37,000 | £50,021 | ||||||
Pay and benefits (excluding pension): | £34,400 | £41,443 | £57,800 | |||||||
Pay ratio (Option A): | 301 | 250 | 179 | 147 |
Figures for the CEO are calculated using the data from the Executive Directors’ single figure table on page 66 translated into sterling using the average exchange rate over 2019 (€1 = £0.8799).
Option A was used to calculate the pay and benefits (including pension) of the 25th percentile, median and 75th percentile UK employees because the data was readily available for all UK employees of the group and Option A is the most accurate method (as it is based on total full-time equivalent total reward for all UK employees for the relevant financial year). Figures are calculated by reference to 31 December 2019, and the respective salary and pay and benefits figures for each quartile are set out in the table above. Full-time equivalent figures are calculated on a pro-rated basis.
Variable pay figures for the UK employees are calculated on the basis set out in the paragraph for other work levels below the ‘CEO/CFO Pay Ratio Comparison’ table. The reason for this is it would be unduly onerous to recalculate these figures when, based on a sample, the impact of such recalculation is expected to be minimal.
Year-on-year comparisons reflects the appointment of Alan Jope as CEO in 2019 following Paul Polman’s retirement at the end of 2018 and as a result the CEO pay ratio has decreased from 2018 to 2019 since Alan Jope’s Fixed Pay was set at a level lower than Paul Polman’s. For the overall UK employee calculation pay and benefit values have increased by approximately 20% due to inclusion of the pension in 2019. Salary for the UK employees has increased minimally because of the change in the New Reward Framework for the WL3s, despite the fact that the workforce in numbers decreased by 3.8% from 2018 to 2019.
Additionally, in the UK and The Netherlands we are now required to show additional disclosures on the rates of change in pay year on year. The pay ratios set out above are more meaningful as they compare to the pay of all of our UK employees. By contrast, the UK regulations require us to show the percentages below based on employees of our PLC top company only, which forms a relatively small proportion of our total UK workforce. So, whilst operationally we may pay greater attention to our internal pay ratios (included above in the ‘CEO/CFO pay ratio comparison’ table), these new required figures are as follows:
Percentage change in remuneration of Executive Directors (CEO/CFO) for UK purposes
The table below shows the five-year history year-on-year percentage change for Fixed Pay, other benefits (excluding pension) and bonus for the CEO, CFO and PLC’s employees (based on total full-time equivalent total reward for the relevant financial year) pursuant to UK requirements. The respective changes in percentages in fees for our Non-Executive Directors are included in the table ‘Percentage change in remuneration of Non-Executive Directors’ on page 72.
Fixed Pay | Other benefits (not including pension) |
Bonus | ||||||||||
% change from 2018 to 2019 |
||||||||||||
CEO(a)(b) |
-9.5% | -92.3% | -7.4% | |||||||||
CFO(a) |
4.2% | 4.8% | 7.9% | |||||||||
PLC employees(d) |
15.0% | -5.2% | 9.7% | |||||||||
% change from 2017 to 2018 |
||||||||||||
CEO(a) |
11.3% | -19.2% | -16.5% | |||||||||
CFO(a) |
8.2% | 8.3% | -10.5% | |||||||||
PLC employees(d) |
8.4% | -5.0% | -3.9% | |||||||||
% change from 2016 to 2017 |
||||||||||||
CEO(a) |
-6.9% | 5.0% | 0.8% | |||||||||
CFO(a) |
-2.2% | -5.5% | 21.1% | |||||||||
PLC employees(d) |
-6.8% | -7.0% | 14.5% | |||||||||
% change from 2015 to 2016 |
||||||||||||
CEO(a) |
-11.0% | -5.1% | -11.0% | |||||||||
CFO(a)(c) |
-30.8% | -32.2% | 14.3% | |||||||||
PLC employees(d) |
10.1% | 19.1% | 16.6% | |||||||||
% change from 2014 to 2015 |
||||||||||||
CEO(a) |
11.3% | 14.5% | 55.8% | |||||||||
CFO(a) |
-16.6% | -27.6% | 4.4% | |||||||||
PLC employees(d) |
0.3% | 20.7% | 79.0% | |||||||||
% change from 2013 to 2014 |
||||||||||||
CEO(a) |
5.2% | 12.4% | -11.4% | |||||||||
CFO(a)(c) |
5.2% | -36.5% | -11.5% | |||||||||
PLC employees(d) |
- | - | - |
(a) | Calculated using the data for UK purposes from the Executive Directors’ single figure table on page 66 (for information on exchange rates please see the footnotes in that table). |
(b) | As at 1 January 2019 Alan Jope succeeded Paul Polman as CEO and therefore the CEO remuneration from 2018 to 2019 decreased compared to prior years as Alan Jope’s Fixed Pay was set at a level lower than Paul Polman’s. |
(c) | As at October 2015 Jean-Marc Huet stepped down as CFO and therefore the figures only include ten months for 2015. Graeme Pitkethly succeeded Jean-Marc Huet as an Executive Director as per 21 April 2016, although he assumed the role of CFO as from October 2015. As a result the figure for 2016 include payments from May 2016 onwards. The CFO remuneration from 2015 to 2016 therefore decreased, which was also due to Graeme Pitkethly’s Fixed Pay being set at a level lower than Jean-Marc Huet’s. In 2013 the CFO received a one-off payment for the loss and costs on the sale of his house, as agreed upon his recruitment. Consequently, ‘other benefits’ decreased from 2014 to 2013. |
(d) | For the PLC employees, Fixed Pay numbers have been restated to include cash-related benefits employees receive as part of their total compensation, to ensure we can accurately compare Fixed Pay for them against that of the CEO and CFO. Figures are also affected by changes in the average sterling: euro exchange rates. For this group of people no figures are available for the years prior to 2014. |
74 | Annual Report on Form 20-F 2019 |
Governance Report |
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Percentage change in remuneration of Executive Directors (CEO/CFO), average total compensation for an employee, CEO and CFO pay ratios and performance of the company for Dutch purposes
The table below shows the five-year history year-on-year percentage change in remuneration for the CEO, CFO and the average total compensation for an employee of the Group (based on total staff costs for the relevant financial year) pursuant to Dutch requirements. The respective change in percentages in fees for our Non-Executive Directors are included in the table ‘Percentage change in remuneration of Non-Executive Directors’ on page 72.
Average total compensation for an employee |
||||||||||||||||||||||||||||||||||||
% change vs previous year for the CEO(a) |
% change vs previous year for the CFO(b) |
per FTE(c) |
% change vs previous year |
CEO/Average compensation per employee mean pay ratio(d) |
CFO/Average compensation per employee mean pay ratio(d) |
Underlying Sales Growth (USG)(e) |
Underlying Earnings per Share (EPS)(e) |
Underlying Operating Margin (UOM)(e) |
||||||||||||||||||||||||||||
2019 |
-48% | -3% | €41,711 | 1% | 108 | 90 | 2.9% | 2.55 | 19.1% | |||||||||||||||||||||||||||
2018 |
-26% | -10% | €41,389 | 2% | 209 | 93 | 3.2% | 2.35 | 18.6% | |||||||||||||||||||||||||||
2017 |
51%(f) | 88%(f) | €40,582 | 5% | 287 | 106 | 2.8% | 2.23 | 17.7% | |||||||||||||||||||||||||||
2016 |
-7% | -4% | €38,538 | 1% | 200 | 60 | 3.6% | 2.03 | 16.4% | |||||||||||||||||||||||||||
2015 |
3% | -44% | €38,271 | 10% | 217 | 63 | 4.1% | 1.93 | 15.6% | |||||||||||||||||||||||||||
2014 |
1% | -14% | €34,923 | -2% | 230 | 123 | 2.9% | 1.73 | 15.5% |
(a) | Calculated using the data for Dutch purposes from the Executive Directors’ single figure table on page 66 (for information on exchange rates please see the footnotes in that table). As at 1 January 2019 Alan Jope succeeded Paul Polman as CEO and therefore the CEO remuneration from 2018 to 2019 decreased compared to prior years as Alan Jope’s Fixed Pay was set at a level lower than Paul Polman’s. The change from 2017 to 2018 is due to a lower MCIP and GSIP performance ratio comparing to the previous year. |
(b) | Calculated using the data for Dutch purposes from the Executive Directors’ single figure table on page 66 (for information on exchange rates please see the footnotes in that table). As at October 2015 Jean-Marc Huet stepped down as CFO and therefore the figures only include ten months for 2015. Graeme Pitkethly succeeded Jean-Marc Huet as an Executive Director as per 21 April 2016, although he assumed the role of CFO as from October 2015. As a result the figure for 2016 include payments from May 2016 onwards. The CFO remuneration from 2015 to 2016 therefore decreased, which was also due to Graeme Pitkethly’s Fixed Pay being set at a level lower than Jean-Marc Huet’s. |
(c) | Calculated using the total staff costs (minus the CEO and CFO remuneration pursuant to Dutch requirements as included in the Executive Directors’ single figure tables) divided by the average number of employees during the year, using the data from Staff and Management costs from note 4A on page 97. |
(d) | Calculated using the data for Dutch purposes from the Executive Directors’ single figure table on page 66 divided by the average total compensation per FTE number in this table for the respective year. |
(e) | USG and UOM are relevant performance measures for both our bonus and long-term incentive plans and Underlying EPS is a relevant performance measure since 2017 when we introduced it for MCIP. In 2019 the definition of USG has changed and currently includes a normalised level of price growth, which will be capped at an annual rate that is equivalent to approximately 2% per month compounded. As result of this new definition USG figures for 2016, 2017 and 2018 have been restated compared to previous disclosures. |
(f) | The CEO and CFO % change from 2016 to 2017 is due to a higher MCIP and GSIP performance ratio compared to the previous years. The year-on-year changes in pay for the average compensation for an employee (FTE) are proportionally smaller than for the CEO and CFO. The CEO and CFO have the highest proportion of variable pay as they have the highest levels of responsibility. The key difference in pay between colleagues at different work levels is quantum; the higher the work level, the greater the value of each element. Also, with successive work levels, the greater the proportion of the total package that is performance related, rather than fixed. |
Relative importance of spend on pay
The chart below shows the relative spend on pay compared with dividends paid to Unilever shareholders and underlying earnings. Underlying earnings represent the underlying profit attributable to Unilever shareholders and provides a good reference point to compare spend on pay. The chart below shows the percentage of movement in underlying earnings, dividends and total staff costs versus the previous year.
Relative importance of spend on pay
In calculating underlying profit attributable to shareholders, net profit attributable to shareholders is adjusted to eliminate the post-tax impact of non-underlying items in operating profit and any other significant unusual terms within net profit but not operating profit (see note 7 on page 107 for details). Restated 2018 data has been used following the adoption of IFRS 16, see note 1 and note 24 (on pages 92 and 138 respectively) for further details.
Annual Report on Form 20-F 2019 | 75 |
Directors’ remuneration report continued
Ten-year historical Total Shareholder Return (TSR) performance
The graph below includes:
• | growth in the value of a hypothetical £100 investment over ten years’ FTSE 100 comparison based on 30-trading-day average values; and |
• | growth in the value of a hypothetical €100 investment over ten years’ AEX comparison based on 30-trading-day average values. |
The table below shows Unilever’s performance against the FTSE 100 Index, London and also the Euronext 100 index (AEX), Amsterdam, the most relevant indices in the UK and the Netherlands where we have our principal listings. Unilever is a constituent of both these indices.
Ten-year historical TSR performance
Serving as a non-executive on the board of another company
Unilever recognises the benefit to the individual and the Group of senior executives acting as directors of other companies in terms of broadening Directors’ knowledge and experience, but the number of outside directorships of listed companies is generally limited to one per Executive Director. The remuneration and fees earned from that particular outside listed directorship may be retained (see ‘Independence and Conflicts’ on page 48 for further details).
Since 1 May 2019 Graeme Pitkethly is a Non-Executive Director of Pearson PLC and he received an annual fee of €64,969 (£57,166) (of which 25% was in accordance with Pearson’s remuneration policy delivered in Pearson shares) based on an average exchange rate over 2019 of €1 = £0.8799.
The Compensation Committee
The Committee had the following members throughout 2019 – Vittorio Colao (Chair), Marijn Dekkers and Andrea Jung. Mary Ma also served as a member of the Committee until her passing on 31 August 2019. Nils Andersen became a Committee member as per 13 November 2019.
During 2019, the Committee met five times and its activities included: determining the 2018 annual bonus outcome; determining vesting of the GSIP and MCIP 2016-2018 awards for the CEO, CFO and the ULE; approving the 2018 Directors’ remuneration report; resolving on changes to the implementation of the remuneration policy to reflect shareholders’ feedback after the AGM 2018 vote on the remuneration policy; setting the 2019 annual bonus and MCIP 2019-2022 performance measures and targets; reviewing Fixed Pay for the CEO and CFO and fees for the Non-Executive Directors; deciding Fixed Pay increases for the other members of the ULE, including approving new ULE members remuneration packages; tracking external developments and assessing their impact on Unilever’s remuneration policy, including implementation of the EU Shareholder Rights Directive; review the functioning of the Reward Framework since its implementation in 2017; workforce pay review and progress on the Fair Compensation Framework; and consultation on the implementation of the remuneration policy for 2020 (see page 60 of the Committee’s Chair letter).
The Committee operates within its terms of reference which were last updated on 20 November 2019. The Committee’s revised terms of reference are contained within ‘The Governance of Unilever’, and are also set out on our website.
![]() |
www.unilever.com/investor-relations/agm-and-corporate-governance/ |
As part of the Board evaluation carried out in 2019, the Boards evaluated the performance of the Committee. The Committee also carried out an assessment of its own performance in 2019. Overall the Committee members concluded that the Committee is performing effectively. The Committee has agreed to further enhance its effectiveness by closely monitoring the regulatory landscape and trends on executive remuneration, in particular around incentives and target setting, in view of the upcoming remuneration policy renewal in 2021.
76 | Annual Report on Form 20-F 2019 |
Governance Report |
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Advisers
While it is the Committee’s responsibility to exercise independent judgement, the Committee does request advice from management and professional advisers, as appropriate, to ensure that its decisions are fully informed given the internal and external environment.
Tom Gosling of PricewaterhouseCoopers (PwC) provided the Committee with independent advice on various matters it considered. During 2019, the wider PwC firm has also provided tax and consultancy services to Unilever including tax compliance, transfer pricing, other tax related services, managed legal services, internal audit advice and secondees, third-party risk and compliance advice, cyber security advice, sustainability assurance and consulting and merger and acquisition support. PwC is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK, which is available online.
![]() |
www.remunerationconsultantsgroup.com (Code of Conduct: Executive Remuneration Consulting) |
The Committee is satisfied that the PwC engagement partner and team, which provide remuneration advice to the Committee, do not have connections with NV or PLC that might impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were appropriate safeguards against such conflicts. The fees paid to PwC in relation to advice provided to the Committee in the year to 31 December 2019 were £112,700. This figure is calculated based on time spent and expenses incurred for the majority of advice provided, but on occasion for specific projects a fixed fee may be agreed.
During the year, the Committee also sought input from the CEO (Alan Jope), the Chief Human Resources Officer (Leena Nair) and the EVP Global Head of Reward (Peter Newhouse) on various subjects including the remuneration of senior management. No individual Executive Director was present when their own remuneration was being determined to ensure a conflict of interest did not arise, although the Committee has separately sought and obtained Executive Directors’ own views when determining the amount and structure of their remuneration before recommending individual packages to the Boards for approval. The Committee also received legal and governance advice from the Chief Legal Officer and Group Secretary (Ritva Sotamaa) and the Chief Counsel Employment & Remuneration (Margot Fransen).
Shareholder voting
Unilever remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. In the event of a substantial vote against a resolution in relation to Directors’ remuneration, Unilever would seek to understand the reasons for any such vote and would set out in the following Annual Report and Accounts any actions in response to it. The following table sets out actual voting in respect of our previous report:
Voting outcome (% of votes) | For | Against | Withheld | |||||||||||||||
2018 Directors’ remuneration report (2019 AGM) (excluding the Directors’ remuneration policy) |
PLC | 95.62% | 4.38% | 10,581,922 | ||||||||||||||
2018 Directors’ remuneration report (2019 AGM) (excluding the Directors’ remuneration policy) |
NV | 96.92% | 3.08% | 1,316,455 | ||||||||||||||
2017 Directors’ remuneration policy (2018 AGM) |
PLC | 64.19% | 35.81% | 38,734,868 | ||||||||||||||
2017 Directors’ remuneration policy (2018 AGM) |
NV | 73.06% | 26.94% | 15,018,135 |
The Directors’ remuneration report has been approved by the Boards, and signed on their behalf by Ritva Sotamaa, Chief Legal Officer and Group Secretary.
Annual Report on Form 20-F 2019 | 77 |
Independent Auditors’ Report continued
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Financial Statements |
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Consolidated Financial Statements
Unilever Group
Consolidated income statement
for the year ended 31 December
|
Notes |
|
|
€ million 2019
|
|
|
€ million 2018 (Restated) |
(a) |
|
€ million 2017 (Restated) |
(a) | |||||
Turnover |
2 | 51,980 | 50,982 | 53,715 | ||||||||||||
Operating profit |
2 | 8,708 | 12,639 | 8,957 | ||||||||||||
Which includes non-underlying item credits/(charges) of |
3 | (1,239 | ) | 3,176 | (543 | ) | ||||||||||
Net finance costs |
5 | (627 | ) | (608 | ) | (1,004 | ) | |||||||||
Finance income |
224 | 135 | 157 | |||||||||||||
Finance costs |
(821 | ) | (718 | ) | (683 | ) | ||||||||||
Pensions and similar obligations |
(30 | ) | (25 | ) | (96 | ) | ||||||||||
Net finance cost non-underlying items |
3 | – | – | (382 | ) | |||||||||||
Non-underlying item net monetary gain/(loss) arising from hyperinflationary economies |
1,3 | 32 | 122 | – | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
11 | 176 | 185 | 155 | ||||||||||||
Which includes non-underlying item credits/(charges) of |
3 | 3 | 32 | – | ||||||||||||
Other income/(loss) from non-current investments and associates |
– | 22 | 18 | |||||||||||||
Profit before taxation |
8,289 | 12,360 | 8,126 | |||||||||||||
Taxation |
6A | (2,263 | ) | (2,572 | ) | (1,670 | ) | |||||||||
Which includes tax impact of non-underlying items of |
3 | 113 | (288 | ) | 655 | |||||||||||
Net profit |
6,026 | 9,788 | 6,456 | |||||||||||||
Attributable to: |
||||||||||||||||
Non-controlling interests |
401 | 419 | 433 | |||||||||||||
Shareholders’ equity |
5,625 | 9,369 | 6,023 | |||||||||||||
Combined earnings per share |
7 | |||||||||||||||
Basic earnings per share (€) |
2.15 | 3.49 | 2.15 | |||||||||||||
Diluted earnings per share (€) |
2.14 | 3.48 | 2.14 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Consolidated statement of comprehensive income
for the year ended 31 December
|
Notes |
|
|
€ million 2019
|
|
|
€ million 2018 (Restated) |
(a) |
|
€ million 2017 (Restated) |
(a) | |||||
Net profit |
6,026 | 9,788 | 6,456 | |||||||||||||
Other comprehensive income |
6C | |||||||||||||||
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(b) |
29 | 51 | – | |||||||||||||
Remeasurement of defined benefit pension plans |
15B | 353 | (328 | ) | 1,282 | |||||||||||
Items that may be reclassified subsequently to profit or loss, net of tax: |
||||||||||||||||
Gains/(losses) on cash flow hedges |
176 | (55 | ) | (68 | ) | |||||||||||
Currency retranslation gains/(losses) |
15B | (15 | ) | (839 | ) | (935 | ) | |||||||||
Fair value gains/(losses) on financial instruments(b) |
15B | – | – | (7 | ) | |||||||||||
Total comprehensive income |
6,569 | 8,617 | 6,728 | |||||||||||||
Attributable to: |
||||||||||||||||
Non-controlling interests |
407 | 407 | 381 | |||||||||||||
Shareholders’ equity |
6,162 | 8,210 | 6,347 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Classification was changed in 2018 following adoption of IFRS 9. |
References in the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet and consolidated cash flow statement relate to notes on pages 91 to 142, which form an integral part of the consolidated financial statements.
Annual Report on Form 20-F 2019 | 87 |
Consolidated Financial Statements
Unilever Group continued
Consolidated statement of changes in equity
for the year ended 31 December
Consolidated statement of changes in equity |
€ million Called up share capital |
€ million Share premium account |
€ million
Other reserves |
€ million
Retained profit |
€ million
Total |
€ million Non- controlling interests |
€ million
Total equity |
|||||||||||||||||||||
31 December 2016 (as previously reported) |
484 | 134 | (7,443 | ) | 23,179 | 16,354 | 626 | 16,980 | ||||||||||||||||||||
IFRS 16 restatement to 1 January 2017(a) |
– | – | (2 | ) | (205 | ) | (207 | ) | – | (207 | ) | |||||||||||||||||
1 January 2017 (restated)(a) |
484 | 134 | (7,445 | ) | 22,974 | 16,147 | 626 | 16,773 | ||||||||||||||||||||
Profit or loss for the period |
– | – | – | 6,023 | 6,023 | 433 | 6,456 | |||||||||||||||||||||
Other comprehensive income net of tax: |
||||||||||||||||||||||||||||
Fair value gains/(losses) on financial instruments(b) |
– | – | (76 | ) | – | (76 | ) | 1 | (75 | ) | ||||||||||||||||||
Remeasurement of defined benefit pension plans net of tax |
– | – | – | 1,282 | 1,282 | – | 1,282 | |||||||||||||||||||||
Currency retranslation gains/(losses) |
– | – | (855 | ) | (27 | ) | (882 | ) | (53 | ) | (935 | ) | ||||||||||||||||
Total comprehensive income |
– | – | (931 | ) | 7,278 | 6,347 | 381 | 6,728 | ||||||||||||||||||||
Dividends on ordinary capital |
– | – | – | (3,916 | ) | (3,916 | ) | – | (3,916 | ) | ||||||||||||||||||
Repurchase of shares(c) |
– | – | (5,014 | ) | – | (5,014 | ) | – | (5,014 | ) | ||||||||||||||||||
Other movements in treasury shares(e) |
– | – | (30 | ) | (174 | ) | (204 | ) | – | (204 | ) | |||||||||||||||||
Share-based payment credit(f) |
– | – | – | 284 | 284 | – | 284 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
– | – | – | – | – | (345 | ) | (345 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
– | (4 | ) | – | – | (4 | ) | – | (4 | ) | ||||||||||||||||||
Other movements in equity |
– | – | (167 | ) | (33 | ) | (200 | ) | 96 | (104 | ) | |||||||||||||||||
31 December 2017 (restated)(a) |
484 | 130 | (13,587 | ) | 26,413 | 13,440 | 758 | 14,198 | ||||||||||||||||||||
Hyperinflation restatement to 1 January 2018 (see note 1) |
– | – | – | 393 | 393 | – | 393 | |||||||||||||||||||||
1 January 2018 (restated) |
484 | 130 | (13,587 | ) | 26,806 | 13,833 | 758 | 14,591 | ||||||||||||||||||||
Profit or loss for the period |
– | – | – | 9,369 | 9,369 | 419 | 9,788 | |||||||||||||||||||||
Other comprehensive income, net of tax: |
||||||||||||||||||||||||||||
Gains/(losses) on:(b) |
||||||||||||||||||||||||||||
Equity instruments |
– | – | 51 | – | 51 | – | 51 | |||||||||||||||||||||
Cash flow hedges |
– | – | (56 | ) | – | (56 | ) | 1 | (55 | ) | ||||||||||||||||||
Remeasurement of defined benefit pension plans |
– | – | – | (330 | ) | (330 | ) | 2 | (328 | ) | ||||||||||||||||||
Currency retranslation gains/(losses) |
– | – | (814 | ) | (10 | ) | (824 | ) | (15 | ) | (839 | ) | ||||||||||||||||
Total comprehensive income |
– | – | (819 | ) | 9,029 | 8,210 | 407 | 8,617 | ||||||||||||||||||||
Dividends on ordinary capital |
– | – | – | (4,081 | ) | (4,081 | ) | – | (4,081 | ) | ||||||||||||||||||
Repurchase of shares(c) |
– | – | (6,020 | ) | – | (6,020 | ) | – | (6,020 | ) | ||||||||||||||||||
Cancellation of treasury shares(d) |
(20 | ) | – | 5,069 | (5,049 | ) | – | – | – | |||||||||||||||||||
Other movements in treasury shares(e) |
– | – | (8 | ) | (245 | ) | (253 | ) | – | (253 | ) | |||||||||||||||||
Share-based payment credit(f) |
– | – | – | 196 | 196 | – | 196 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
– | – | – | – | – | (342 | ) | (342 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
– | (1 | ) | – | – | (1 | ) | – | (1 | ) | ||||||||||||||||||
Hedging gain/(loss) transferred to non-financial assets |
– | – | 71 | – | 71 | – | 71 | |||||||||||||||||||||
Other movements in equity(g) |
– | – | 76 | (634 | ) | (558 | ) | (103 | ) | (661 | ) | |||||||||||||||||
31 December 2018 (restated)(a) |
464 | 129 | (15,218 | ) | 26,022 | 11,397 | 720 | 12,117 | ||||||||||||||||||||
Impact of adopting IFRIC 23 (see note 1) |
– | – | – | (38 | ) | (38 | ) | – | (38 | ) | ||||||||||||||||||
1 January 2019 (restated) |
464 | 129 | (15,218 | ) | 25,984 | 11,359 | 720 | 12,079 | ||||||||||||||||||||
Profit or loss for the period |
– | – | – | 5,625 | 5,625 | 401 | 6,026 | |||||||||||||||||||||
Other comprehensive income, net of tax: |
||||||||||||||||||||||||||||
Gains/(losses) on:(b) |
||||||||||||||||||||||||||||
Equity instruments |
– | – | 25 | – | 25 | 4 | 29 | |||||||||||||||||||||
Cash flow hedges |
– | – | 176 | – | 176 | – | 176 | |||||||||||||||||||||
Remeasurement of defined benefit pension plans |
– | – | – | 352 | 352 | 1 | 353 | |||||||||||||||||||||
Currency retranslation gains/(losses) |
– | – | (18 | ) | 2 | (16 | ) | 1 | (15 | ) | ||||||||||||||||||
Total comprehensive income |
– | – | 183 | 5,979 | 6,162 | 407 | 6,569 | |||||||||||||||||||||
Dividends on ordinary capital |
– | – | – | (4,223 | ) | (4,223 | ) | – | (4,223 | ) | ||||||||||||||||||
Cancellation of treasury shares(d) |
(44 | ) | – | 9,416 | (9,372 | ) | – | – | – | |||||||||||||||||||
Other movements in treasury shares(e) |
– | – | 64 | (231 | ) | (167 | ) | – | (167 | ) | ||||||||||||||||||
Share-based payment credit(f) |
– | – | – | 151 | 151 | – | 151 | |||||||||||||||||||||
Dividends paid to non-controlling interests |
– | – | – | – | – | (435 | ) | (435 | ) | |||||||||||||||||||
Currency retranslation gains/(losses) net of tax |
– | 5 | – | – | 5 | – | 5 | |||||||||||||||||||||
Hedging gain/(loss) transferred to non-financial assets |
– | – | 32 | – | 32 | – | 32 | |||||||||||||||||||||
Other movements in equity |
– | – | (51 | ) | (76 | ) | (127 | ) | 2 | (125 | ) | |||||||||||||||||
31 December 2019 |
420 | 134 | (5,574 | ) | 18,212 | 13,192 | 694 | 13,886 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Classification was changed in 2018 following adoption of IFRS 9. |
(c) | Repurchase of shares reflects the cost of acquiring ordinary shares as part of the share buyback programmes announced on 19 April 2018 and 6 April 2017. |
(d) | During 2019 254,012,896 NV ordinary shares and 18,660,634 PLC ordinary shares were cancelled and in 2018 122,965,077 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. |
(e) | Includes purchases and sales of treasury shares other than the share buyback programme, transfer from treasury shares to retained profit of share-settled schemes arising from prior years and differences between exercise and grant price of share options. |
(f) | The share-based payment credit relates to the non-cash charge recorded in operating profit in respect of the fair value of share options and awards granted to employees. |
(g) | 2018 includes a €662 million premium paid for purchase of the non-controlling interest in Unilever South Africa from Remgro. |
88 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
Consolidated balance sheet
|
Notes |
|
|
€ million 31 December 2019
|
|
|
€ million 31 December 2018 (Restated) |
(a) |
|
€ million 1 January 2018 (Restated) |
(a) | |||||
Assets |
||||||||||||||||
Non-current assets |
||||||||||||||||
Goodwill |
9 | 18,067 | 17,341 | 16,881 | ||||||||||||
Intangible assets |
9 | 12,962 | 12,152 | 11,520 | ||||||||||||
Property, plant and equipment |
10 | 12,062 | 12,088 | 12,270 | ||||||||||||
Pension asset for funded schemes in surplus |
4B | 2,422 | 1,728 | 2,173 | ||||||||||||
Deferred tax assets |
6B | 1,336 | 1,152 | 1,118 | ||||||||||||
Financial assets |
17A | 874 | 642 | 675 | ||||||||||||
Other non-current assets |
11 | 653 | 530 | 441 | ||||||||||||
48,376 | 45,633 | 45,078 | ||||||||||||||
Current assets |
||||||||||||||||
Inventories |
12 | 4,164 | 4,301 | 3,962 | ||||||||||||
Trade and other current receivables |
13 | 6,695 | 6,482 | 5,219 | ||||||||||||
Current tax assets |
397 | 472 | 488 | |||||||||||||
Cash and cash equivalents |
17A | 4,185 | 3,230 | 3,317 | ||||||||||||
Other financial assets |
17A | 907 | 874 | 770 | ||||||||||||
Assets held for sale |
22 | 82 | 119 | 3,224 | ||||||||||||
16,430 | 15,478 | 16,980 | ||||||||||||||
Total assets |
64,806 | 61,111 | 62,058 | |||||||||||||
Liabilities |
||||||||||||||||
Current liabilities |
||||||||||||||||
Financial liabilities |
15C | 4,691 | 3,613 | 8,378 | ||||||||||||
Trade payables and other current liabilities |
14 | 14,768 | 14,457 | 13,426 | ||||||||||||
Current tax liabilities |
898 | 1,445 | 1,088 | |||||||||||||
Provisions |
19 | 620 | 624 | 525 | ||||||||||||
Liabilities held for sale |
22 | 1 | 11 | 170 | ||||||||||||
20,978 | 20,150 | 23,587 | ||||||||||||||
Non-current liabilities |
||||||||||||||||
Financial liabilities |
15C | 23,566 | 23,125 | 18,039 | ||||||||||||
Non-current tax liabilities |
182 | 174 | 118 | |||||||||||||
Pensions and post-retirement healthcare liabilities: |
||||||||||||||||
Funded schemes in deficit |
4B | 1,157 | 1,209 | 1,225 | ||||||||||||
Unfunded schemes |
4B | 1,461 | 1,393 | 1,509 | ||||||||||||
Provisions |
19 | 664 | 697 | 794 | ||||||||||||
Deferred tax liabilities |
6B | 2,573 | 1,900 | 1,888 | ||||||||||||
Other non-current liabilities |
14 | 339 | 346 | 700 | ||||||||||||
29,942 | 28,844 | 24,273 | ||||||||||||||
Total liabilities |
50,920 | 48,994 | 47,860 | |||||||||||||
Equity |
||||||||||||||||
Shareholders’ equity |
||||||||||||||||
Called up share capital |
15A | 420 | 464 | 484 | ||||||||||||
Share premium account |
134 | 129 | 130 | |||||||||||||
Other reserves |
15B | (5,574 | ) | (15,218 | ) | (13,587 | ) | |||||||||
Retained profit |
18,212 | 26,022 | 26,413 | |||||||||||||
13,192 | 11,397 | 13,440 | ||||||||||||||
Non-controlling interests |
694 | 720 | 758 | |||||||||||||
Total equity |
13,886 | 12,117 | 14,198 | |||||||||||||
Total liabilities and equity |
64,806 | 61,111 | 62,058 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
These financial statements have been approved by the Directors.
The Board of Directors
4 March 2020
Annual Report on Form 20-F 2019 | 89 |
Consolidated Financial Statements
Unilever Group continued
Consolidated cash flow statement
for the year ended 31 December
|
Notes |
|
|
€ million 2019
|
|
|
€ million 2018 (Restated) |
(a) |
|
€ million 2017 (Restated) |
(a) | |||||
Net profit |
6,026 | 9,788 | 6,456 | |||||||||||||
Taxation |
2,263 | 2,572 | 1,670 | |||||||||||||
Share of net (profit)/loss of joint ventures/associates and other (income)/loss from non-current investments and associates |
(176 | ) | (207 | ) | (173 | ) | ||||||||||
Net monetary (gain)/loss arising from hyperinflationary economies |
(32 | ) | (122 | ) | – | |||||||||||
Net finance costs |
5 | 627 | 608 | 1,004 | ||||||||||||
Operating profit |
8,708 | 12,639 | 8,957 | |||||||||||||
Depreciation, amortisation and impairment |
1,982 | 2,216 | 2,025 | |||||||||||||
Changes in working capital: |
(9 | ) | (793 | ) | (68 | ) | ||||||||||
Inventories |
313 | (471 | ) | (104 | ) | |||||||||||
Trade and other receivables |
(445 | ) | (1,298 | ) | (506 | ) | ||||||||||
Trade payables and other liabilities |
123 | 976 | 542 | |||||||||||||
Pensions and similar obligations less payments |
(260 | ) | (128 | ) | (904 | ) | ||||||||||
Provisions less payments |
7 | 55 | 200 | |||||||||||||
Elimination of (profits)/losses on disposals |
60 | (4,313 | ) | (298 | ) | |||||||||||
Non-cash charge for share-based compensation |
151 | 196 | 284 | |||||||||||||
Other adjustments(b) |
2 | (260 | ) | (153 | ) | |||||||||||
Cash flow from operating activities |
10,641 | 9,612 | 10,043 | |||||||||||||
Income tax paid |
(2,532 | ) | (2,294 | ) | (2,164 | ) | ||||||||||
Net cash flow from operating activities |
8,109 | 7,318 | 7,879 | |||||||||||||
Interest received |
146 | 110 | 154 | |||||||||||||
Purchase of intangible assets |
(210 | ) | (203 | ) | (158 | ) | ||||||||||
Purchase of property, plant and equipment |
(1,316 | ) | (1,329 | ) | (1,509 | ) | ||||||||||
Disposal of property, plant and equipment |
97 | 108 | 46 | |||||||||||||
Acquisition of businesses and investments in joint ventures and associates |
(1,122 | ) | (1,336 | ) | (4,896 | ) | ||||||||||
Disposal of businesses, joint ventures and associates |
177 | 7,093 | 561 | |||||||||||||
Acquisition of other non-current investments |
(160 | ) | (94 | ) | (317 | ) | ||||||||||
Disposal of other non-current investments |
55 | 151 | 251 | |||||||||||||
Dividends from joint ventures, associates and other non-current investments |
164 | 154 | 138 | |||||||||||||
(Purchase)/sale of financial assets |
(68 | ) | (10 | ) | (149 | ) | ||||||||||
Net cash flow (used in)/from investing activities |
(2,237 | ) | 4,644 | (5,879 | ) | |||||||||||
Dividends paid on ordinary share capital |
(4,209 | ) | (4,066 | ) | (3,916 | ) | ||||||||||
Interest paid |
(694 | ) | (571 | ) | (574 | ) | ||||||||||
Net change in short-term borrowings |
337 | (4,026 | ) | 2,695 | ||||||||||||
Additional financial liabilities |
5,911 | 10,595 | 8,851 | |||||||||||||
Repayment of financial liabilities |
(4,912 | ) | (6,594 | ) | (2,604 | ) | ||||||||||
Capital element of lease payments |
(435 | ) | (481 | ) | (497 | ) | ||||||||||
Buyback of preference shares |
– | – | (448 | ) | ||||||||||||
Repurchase of shares |
– | (6,020 | ) | (5,014 | ) | |||||||||||
Other movements on treasury shares |
(201 | ) | (257 | ) | (204 | ) | ||||||||||
Other financing activities |
(464 | ) | (693 | ) | (309 | ) | ||||||||||
Net cash flow (used in)/from financing activities |
(4,667 | ) | (12,113 | ) | (2,020 | ) | ||||||||||
Net increase/(decrease) in cash and cash equivalents |
1,205 | (151 | ) | (20 | ) | |||||||||||
Cash and cash equivalents at the beginning of the year |
3,090 | 3,169 | 3,198 | |||||||||||||
Effect of foreign exchange rate changes |
(179 | ) | 72 | (9 | ) | |||||||||||
Cash and cash equivalents at the end of the year |
17A | 4,116 | 3,090 | 3,169 |
(a) | Restated following adoption of IFRS 16. See note 1 and 24 for further details. |
(b) | 2018 includes a non-cash credit of €277 million from early settlement of contingent consideration relating to Blueair. |
The cash flows of pension funds (other than contributions and other direct payments made by the Group in respect of pensions and similar obligations) are not included in the Group cash flow statement.
90 | Annual Report on Form 20-F 2019 |
Notes to the Consolidated Financial Statements
Unilever Group continued
1. Accounting information and policies continued
Recent accounting developments
Adopted by the group
The Group applied for the first-time amendments to the following standards from 1 January 2019.
Applicable standard
|
Key requirements or changes in accounting policy
|
Implementation progress and expected impact
| ||
IFRS 16 ‘Leases’ |
This standard changes the recognition, measurement, presentation and disclosure of leases. In particular it requires lessees to record all leases on the balance sheet with exemptions available for low value and short-term leases. At the commencement of a lease, a lessee recognises lease payments (lease liability) and an asset representing the right to use the asset during the lease term (leased asset). Lessees subsequently reduce the lease liability when paid and recognise depreciation on the leased asset.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased asset.
The standard has no impact on the actual cash flows of a group. However the standard requires the capitalisation, and subsequent depreciation, of costs that were previously expensed as paid which impacts disclosures of cash flows within the cash flow statement. The amounts previously expensed as operating cash outflows are instead capitalised and presented as financing cash outflows. |
The Group has adopted IFRS 16 Leases in its reporting from 1 January 2019, applying the standard using the ‘full retrospective’ approach, and amounts relating to the years ended 31 December 2018 and 2017 have been restated in these financial statements.
The Group has recognised all leases on its balance sheet upon transition to IFRS 16, except for short-term leases (less than a year) and leases for low-value assets.
The impact of adopting IFRS 16 on the Group’s financial statements is further detailed in note 24. | ||
IFRIC 23 ‘Uncertainty over income tax treatments’ |
This interpretation clarifies how entities should reflect uncertainties over income tax treatments. | The Group applies judgement in identifying uncertainties over income tax treatments and has adjusted its uncertain tax provisions to be in line with the new criteria. The Group has elected to recognise the cumulative impact of €38 million within opening retained earnings. |
92 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
Applicable standard
|
Key requirements or changes in accounting policy
|
Implementation progress and expected impact
| ||
Amendments to IAS 19 ‘Employee Benefits’ |
The change requires that following plan amendments, curtailments or settlements, current service and net interest costs for the remainder of the reporting period should be calculated in line with updated actuarial assumptions. | The amendment is applied prospectively. During the period the amendment had no impact on the Group financial statements. |
All other standards or amendments to standards that have been issued by the IASB and were effective by 1 January 2019 were not applicable or material to Unilever.
New standards, amendments and interpretations of existing standards that are not yet effective and have not been early adopted by the Group
The following new standards have been released but are not yet adopted by the Group. The expected impact and progress is shown below. In addition to the above, based on an initial review the Group does not currently believe adoption of the following standard/amendments will have a material impact on the consolidated results or financial position of the Group.
Applicable standard | Key requirements or changes in accounting policy | |
Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7
Effective from the year ending 31 December 2020 |
The amendments modify specific hedge accounting requirements so entities can 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.
We do not have material derivatives that refer to an interest rate benchmark so these amendments will not have a material impact on Unilever. | |
IFRS 17 ‘Insurance Contracts’
Effective from the year ending 31 December 2022 |
This standard introduces a new model for accounting for insurance contracts. Work continues to review existing arrangements to determine the impact on adoption. Based on preliminary work the impact is estimated to be immaterial. |
All other standards or amendments to standards that have been issued by the IASB and are effective from 1 January 2020 onwards are not applicable or material to Unilever.
2. Segment information
Segmental reporting |
||||
Beauty & Personal Care | – primarily sales of skin cleansing (soap, shower), skin care (face, hand and body moisturisers), hair care (shampoo, conditioner, styling) and deodorants categories. | |||
Foods & Refreshment | – primarily sales of ice cream, savoury (soups, bouillons, seasoning), dressings (mayonnaise, ketchup) and tea categories. | |||
Home Care | – primarily sales of fabric category (washing powders and liquids, rinse conditioners) and includes a wide range of cleaning products. | |||
Revenue
Turnover comprises sales of goods after the deduction of discounts, sales taxes and estimated returns. It does not include sales between group companies. Discounts given by Unilever include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs and are based on the contractual arrangements with each customer. Discounts can either be immediately deducted from the sales value on the invoice or off-invoice and settled later through credit notes when the precise amounts are known. Rebates are generally off-invoice. Amounts provided for discounts at the end of a period require estimation; historical data and accumulated experience is used to estimate the provision using the most likely amount method and in most instances the discount can be estimated using known facts with a high level of accuracy. Any differences between actual amounts settled and the amounts provided are not material and recognised in the subsequent reporting period.
Customer contracts generally contain a single performance obligation and turnover is recognised when control of the products being sold has transferred to our customer as there are no longer any unfulfilled obligations to the customer. This is generally on delivery to the customer but depending on individual customer terms, this can be at the time of dispatch, delivery or upon formal customer acceptance. This is considered the appropriate point where the performance obligations in our contracts are satisfied as Unilever no longer has control over the inventory.
Our customers have the contractual right to return goods only when authorised by Unilever. At 31 December 2019, an estimate has been made of goods that will be returned and a liability has been recognised for this amount. An asset has also been recorded for the corresponding inventory that is estimated to return to Unilever using a best estimate based on accumulated experience.
Some of our customers are distributors who may be able to return unsold goods in consignment arrangements.
Underlying operating profit
Underlying operating profit means operating profit before the impact of non-underlying items within operating profit (see note 3). 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.
|
Annual Report on Form 20-F 2019 | 93 |
Notes to the Consolidated Financial Statements
Unilever Group continued
2. Segment information continued
Our segments are comprised of similar product categories. 9 categories (2018: 9; 2017: 10) individually accounted for 5% or more of our revenue in one or more of the last three years. The following table shows the relevant contribution of these categories to group revenue for the periods shown:
Category | Segment | 2019 | 2018 | 2017 | ||||||||||
Fabric | Home Care | 15% | 15% | 15% | ||||||||||
Ice cream | Foods & Refreshment | 13% | 13% | 13% | ||||||||||
Hair care | Beauty & Personal Care | 12% | 12% | 11% | ||||||||||
Savoury | Foods & Refreshment | 11% | 11% | 11% | ||||||||||
Skin cleansing | Beauty & Personal Care | 10% | 10% | 10% | ||||||||||
Deodorants | Beauty & Personal Care | 8% | 8% | 8% | ||||||||||
Skin care | Beauty & Personal Care | 8% | 7% | 6% | ||||||||||
Tea | Foods & Refreshment | 6% | 6% | 5% | ||||||||||
Dressings | Foods & Refreshment | 5% | 5% | 6% | ||||||||||
Spreads | Foods & Refreshment | - | 3% | 6% | ||||||||||
Other |
12% | 10% | 9% |
The group operating segment information is provided based on three product areas: Beauty & Personal Care, Foods & Refreshment and Home Care
Notes | € million Beauty & |
€ million Foods & Refreshment |
€ million Care |
€ million
Total |
||||||||||||||||
2019 | ||||||||||||||||||||
Turnover | 21,868 | 19,287 | 10,825 | 51,980 | ||||||||||||||||
Operating profit | 4,520 | 2,811 | 1,377 | 8,708 | ||||||||||||||||
Non-underlying items | 3 | 440 | 571 | 228 | 1,239 | |||||||||||||||
Underlying operating profit | 4,960 | 3,382 | 1,605 | 9,947 | ||||||||||||||||
Share of net profit/(loss) of joint ventures and associates | 1 | 171 | 4 | 176 | ||||||||||||||||
Significant non-cash charges: | ||||||||||||||||||||
Within underlying operating profit: |
||||||||||||||||||||
Depreciation and amortisation |
693 | 902 | 369 | 1,964 | ||||||||||||||||
Share-based compensation and other non-cash charges(b) |
62 | 56 | 50 | 168 | ||||||||||||||||
Within non-underlying items: |
||||||||||||||||||||
Impairment and other non-cash charges(c) |
105 | 159 | 46 | 310 | ||||||||||||||||
2018 (Restated)(a) | ||||||||||||||||||||
Turnover | 20,624 | 20,227 | 10,131 | 50,982 | ||||||||||||||||
Operating profit | 4,165 | 7,287 | 1,187 | 12,639 | ||||||||||||||||
Non-underlying items | 3 | 378 | (3,711 | ) | 157 | (3,176 | ) | |||||||||||||
Underlying operating profit | 4,543 | 3,576 | 1,344 | 9,463 | ||||||||||||||||
Share of net profit/(loss) of joint ventures and associates | (1 | ) | 183 | 3 | 185 | |||||||||||||||
Significant non-cash charges: | ||||||||||||||||||||
Within underlying operating profit: |
||||||||||||||||||||
Depreciation and amortisation |
686 | 949 | 373 | 2,008 | ||||||||||||||||
Share-based compensation and other non-cash charges(b) |
102 | 102 | 46 | 250 | ||||||||||||||||
Within non-underlying items: |
||||||||||||||||||||
Impairment and other non-cash charges(c) |
122 | 164 | 263 | 549 | ||||||||||||||||
2017 (Restated)(a) | ||||||||||||||||||||
Turnover | 20,697 | 22,444 | 10,574 | 53,715 | ||||||||||||||||
Operating profit | 4,140 | 3,657 | 1,160 | 8,957 | ||||||||||||||||
Non-underlying items | 3 | 272 | 121 | 150 | 543 | |||||||||||||||
Underlying operating profit | 4,412 | 3,778 | 1,310 | 9,500 | ||||||||||||||||
Share of net profit/(loss) of joint ventures and associates | 8 | 143 | 4 | 155 | ||||||||||||||||
Significant non-cash charges: | ||||||||||||||||||||
Within underlying operating profit: |
||||||||||||||||||||
Depreciation and amortisation |
641 | 1,059 | 325 | 2,025 | ||||||||||||||||
Share-based compensation and other non-cash charges(b) |
164 | 174 | 79 | 417 | ||||||||||||||||
Within non-underlying items: |
||||||||||||||||||||
Impairment and other non-cash charges(c) |
80 | 191 | 48 | 319 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Other non-cash charges within underlying operating profit include movements in provisions from underlying activities, excluding movements arising from non-underlying activities. |
(c) | Other non-cash charges within non-underlying items includes movements in restructuring provisions and certain legal provisions (in 2018 and 2017). |
The Unilever Group is not reliant on turnover from transactions with any single customer and does not receive 10% or more of its turnover from transactions with any single customer.
Segment assets and liabilities are not provided because they are not reported to or reviewed by our chief operating decision-maker, which is Unilever Leadership Executive (ULE).
94 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
2. Segment information continued
The home countries of the Unilever Group are the Netherlands and the United Kingdom. Turnover and non-current assets for these two countries combined, for the United States (being the largest country outside the home countries) and for all other countries are:
€ million Netherlands /United Kingdom |
€ million
United States |
€ million
Others |
€ million
Total |
|||||||||||||
2019 | ||||||||||||||||
Turnover | 3,508 | 8,702 | 39,770 | 51,980 | ||||||||||||
Non-current assets(b) |
4,705 | 13,326 | 25,714 | 43,744 | ||||||||||||
2018 (Restated)(a) | ||||||||||||||||
Turnover | 3,679 | 8,305 | 38,998 | 50,982 | ||||||||||||
Non-current assets(b) |
4,336 | 12,471 | 25,304 | 42,111 | ||||||||||||
2017 (Restated)(a) | ||||||||||||||||
Turnover | 3,849 | 8,532 | 41,334 | 53,715 | ||||||||||||
Non-current assets(b) |
4,101 | 12,110 | 24,901 | 41,112 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | For the purpose of this table, non-current assets include goodwill, intangible assets, property, plant and equipment and other non-current assets as shown on the consolidated balance sheet on page 89. Goodwill is attributed to the countries where the acquired business operated at the time of acquisition; all other assets are attributed to the countries where they were acquired. |
No other country had turnover or non-current assets (as shown above) greater than 10% of the Group total.
Additional information by geographies
Although the Group’s operations are managed by product area, we provide additional information based on geographies. The analysis of turnover by geographical area is stated on the basis of origin.
€ million Asia/ AMET/RUB(b) |
€ million The Americas |
€ million
Europe |
€ million
Total |
|||||||||||||
2019 | ||||||||||||||||
Turnover | 24,129 | 16,482 | 11,369 | 51,980 | ||||||||||||
Operating profit | 4,418 | 2,683 | 1,607 | 8,708 | ||||||||||||
Non-underlying items | 439 | 395 | 405 | 1,239 | ||||||||||||
Underlying operating profit | 4,857 | 3,078 | 2,012 | 9,947 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
(5 | ) | 126 | 55 | 176 | |||||||||||
2018 (Restated)(a) | ||||||||||||||||
Turnover | 22,868 | 16,020 | 12,094 | 50,982 | ||||||||||||
Operating profit | 4,824 | 3,621 | 4,194 | 12,639 | ||||||||||||
Non-underlying items | (437 | ) | (892 | ) | (1,847 | ) | (3,176 | ) | ||||||||
Underlying operating profit | 4,387 | 2,729 | 2,347 | 9,463 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
– | 114 | 71 | 185 | ||||||||||||
2017 (Restated)(a) | ||||||||||||||||
Turnover | 23,266 | 17,525 | 12,924 | 53,715 | ||||||||||||
Operating profit | 3,847 | 3,120 | 1,990 | 8,957 | ||||||||||||
Non-underlying items | 306 | (23 | ) | 260 | 543 | |||||||||||
Underlying operating profit | 4,153 | 3,097 | 2,250 | 9,500 | ||||||||||||
Share of net profit/(loss) of joint ventures and associates |
12 | 112 | 31 | 155 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Refers to Asia, Africa, Middle East, Turkey, Russia, Ukraine and Belarus. |
Transactions between the Unilever Group’s geographical regions are immaterial and are carried out on an arm’s length basis.
3. Operating costs and non-underlying items
Operating costs
Operating costs include cost of sales, brand and marketing investment and overheads.
(i) Cost of sales
Cost of sales includes the cost of inventories sold during the period and distribution costs. The cost of inventories are raw and packaging materials and related production costs. Distribution costs are charged to the income statement as incurred.
(ii) Brand and marketing investment
Brand and marketing investment include costs related to creating and maintaining brand equity and brand awareness. This includes media, advertising production, promotional materials and engagement with consumers. These costs are charged to the income statement as incurred.
(iii) Overheads
Overheads include staff costs associated with sales activities and central functions such as finance, human resources and research and development costs. Research and development costs are staff costs, material costs, depreciation of property, plant and equipment and other costs that are directly attributable to research and product development activities. These costs are charged to the income statement as incurred.
|
Annual Report on Form 20-F 2019 | 95 |
Notes to the Consolidated Financial Statements
Unilever Group continued
3. Operating costs and non-underlying items continued
Non-underlying items
These items are relevant to an understanding of our financial performance due to their nature and/or frequency of occurrence.
(i) Non-underlying items within operating profit
These are gains and losses on business disposals, acquisition and disposal-related costs, restructuring costs, impairments and one-off items within operating profit. 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.
(ii) Non-underlying items not in operating profit but within net profit
These are net monetary gain or 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.
|
|
€ million 2019 |
|
|
€ million 2018 (Restated) |
(a) |
|
€ million 2017 (Restated) |
(a) | ||||
Turnover | 51,980 | 50,982 | 53,715 | |||||||||
Cost of sales | (29,102 | ) | (28,703 | ) | (30,484 | ) | ||||||
of which: |
||||||||||||
Distribution costs |
(3,089 | ) | (3,057 | ) | (3,202 | ) | ||||||
Production costs |
(3,701 | ) | (3,732 | ) | (4,190 | ) | ||||||
Raw and packaging materials and goods purchased for resale |
(20,769 | ) | (20,516 | ) | (21,587 | ) | ||||||
Other |
(1,543 | ) | (1,398 | ) | (1,505 | ) | ||||||
Gross profit | 22,878 | 22,279 | 23,231 | |||||||||
Selling and administrative expenses | (12,931 | ) | (12,816 | ) | (13,731 | ) | ||||||
of which: |
||||||||||||
Brand and marketing investment |
(7,272 | ) | (7,150 | ) | (7,575 | ) | ||||||
Overheads |
(5,659 | ) | (5,666 | ) | (6,156 | ) | ||||||
of which: Research and development |
(840 | ) | (900 | ) | (900 | ) | ||||||
Non-underlying items within operating profit before tax |
(1,239 | ) | 3,176 | (543 | ) | |||||||
Operating profit |
8,708 | 12,639 | 8,957 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Exchange losses within operating costs are €41 million (2018: €49 million; 2017: €214 million).
Non-underlying items
Non-underlying items are disclosed on the face of the income statement to provide additional information to users to help them better understand underlying business performance.
€ million 2019 |
€
million 2018 |
€
million 2017 |
||||||||||
Non-underlying items within operating profit before tax | (1,239 | ) | 3176 | (543 | ) | |||||||
Acquisition and disposal-related costs(a) |
(132 | ) | 76 | (159 | ) | |||||||
Gain/(loss) on disposal of group companies(b) |
70 | 4,331 | 334 | |||||||||
Restructuring costs(c) |
(1,159 | ) | (914 | ) | (638 | ) | ||||||
Impairments(d) |
(18 | ) | (208 | ) | – | |||||||
One-off items(e) |
– | (109 | ) | (80 | ) | |||||||
Tax on non-underlying items within operating profit(f) | 309 | (259 | ) | 77 | ||||||||
Non-underlying items within operating profit after tax |
(930 | ) | 2,917 | (466 | ) | |||||||
Non-underlying items not in operating profit but within net profit before tax | 35 | 154 | (382 | ) | ||||||||
Premium paid on buyback of preference shares |
– | – | (382 | ) | ||||||||
Share of gain on disposal of Spreads business in Portugal JV |
3 | 32 | – | |||||||||
Net monetary gain arising from hyperinflationary economies |
32 | 122 | – | |||||||||
Tax impact of non-underlying items not in operating profit but within net profit(f) | (196 | ) | (29 | ) | 578 | |||||||
Impact of US tax reform(g) |
– | (29 | ) | 578 | ||||||||
Taxes related to the reorganisation of our European business |
(175 | ) | – | – | ||||||||
Hyperinflation adjustment for Argentina deferred tax |
(21 | ) | – | – | ||||||||
Non-underlying items not in operating profit but within net profit after tax |
(161 | ) | 125 | 196 | ||||||||
Non-underlying items after tax(h) | (1,091 | ) | 3,042 | (270 | ) | |||||||
Attributable to: | ||||||||||||
Non-controlling interest |
(28 | ) | 18 | (8 | ) | |||||||
Shareholders’ equity |
(1,063 | ) | 3,024 | (262 | ) |
(a) | 2018 includes a credit of €277 million from early settlement of contingent consideration relating to Blueair. |
(b) | 2019 includes a gain of €57 million relating to the disposal of Alsa. 2018 includes a gain of €4,331 million on disposal of spreads business. 2017 includes a gain of €309 million from the sale of AdeS soy beverage business in Latin America. |
(c) | Restructuring costs are comprised of various supply chain optimisation projects and organisational change programmes across markets all of which have been further accelerated during 2019. |
(d) | 2019 includes a charge of €18 million relating to an impairment of goodwill for a local business classified to held for sale. 2018 includes a charge of €208 million relating to impairment of Blueair intangible asset. |
(e) | 2018 includes a charge of €98 million for litigation matters comprised of €48 million for UK pension obligations and €50 million for legal cases in relation to investigations by national competition authorities. 2017 includes an €80 million charge for legal cases in relation to investigations by national competition authorities including those within Italy and South Africa. |
(f) | Tax impact of non-underlying items shown in the income statement is the total of tax on non-underlying items within operating profit and the tax impact of non-underlying items not in operating profit but within net profit. |
(g) | On 22 December 2017, HR1, formerly known as the Tax Cuts and Jobs Act was signed into law in the United States. As a result, tax benefit of €578 million was recognised in 2017, primarily due to re-measurement of deferred tax assets and liabilities at the new lower 21% federal tax rate. |
(h) | 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. |
96 | Annual Report on Form 20-F 2019 |
Financial Statements |
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4. Employees
4A. Staff and management costs
Staff costs |
€ million 2019 |
€ million 2018 |
€ million 2017 |
|||||||||
Wages and salaries | (5,364 | ) | (5,346 | ) | (5,416 | ) | ||||||
Social security costs | (541 | ) | (571 | ) | (613 | ) | ||||||
Other pension costs | (334 | ) | (439 | ) | (399 | ) | ||||||
Share-based compensation costs | (151 | ) | (196 | ) | (284 | ) | ||||||
(6,390 | ) | (6,552 | ) | (6,712 | ) | |||||||
Average number of employees during the year |
‘000 2019 |
‘000 2018 |
‘000 2017 |
|||||||||
Asia/AMET/RUB | 84 | 88 | 93 | |||||||||
The Americas | 40 | 40 | 41 | |||||||||
Europe | 29 | 30 | 31 | |||||||||
153 | 158 | 165 | ||||||||||
Key management compensation |
€ million 2019 |
€ million 2018 |
€ million 2017 |
|||||||||
Salaries and short-term employee benefits | (42 | ) | (40 | ) | (34 | ) | ||||||
Post-employment benefits | – | – | – | |||||||||
Share-based benefits(a) | (16 | ) | (13 | ) | (26 | ) | ||||||
(58 | ) | (53 | ) | (60 | ) | |||||||
Of which: Executive Directors | (9 | ) | (13 | ) | (17 | ) | ||||||
Other(b) |
(49 | ) | (40 | ) | (43 | ) | ||||||
Non-Executive Directors’ fees | (2 | ) | (2 | ) | (2 | ) | ||||||
(60 | ) | (55 | ) | (62 | ) |
(a) | Share-based benefits are shown based on the expense recognised in the income statement. Share-based benefits compensation for key management on a vesting basis is €17 million (2018: €19 million; 2017: €20 million). |
(b) | Other includes all members of the Unilever Leadership Executive, other than Executive Directors. |
Key management are defined as the members of Unilever Leadership Executive (ULE) and the Non-Executive Directors. Compensation for the ULE includes the full-year compensation for ULE members who joined part way through the year.
Annual Report on Form 20-F 2019 | 97 |
Notes to the Consolidated Financial Statements
Unilever Group continued
4B. Pensions and similar obligations
For defined benefit plans, operating and finance costs are recognised separately in the income statement. The amount charged to operating cost in the income statement is the cost of accruing pension benefits promised to employees over the year, plus the costs of individual events such as past service benefit changes, settlements and curtailments (such events are recognised immediately in the income statement). The amount charged or credited to finance costs is a net interest expense calculated by applying the liability discount rate to the net defined benefit liability or asset. Any differences between the expected interest on assets and the return actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the plans, are recognised immediately in the statement of comprehensive income.
The defined benefit plan surplus or deficit on the balance sheet comprises the total for each plan of the fair value of plan assets less the present value of the defined benefit liabilities (using a discount rate based on high-quality corporate bonds, or a suitable alternative where there is no active corporate bond market).
All defined benefit plans are subject to regular actuarial review using the projected unit method by external consultants. The Group policy is that the most material plans, representing approximately 84% of the defined benefit liabilities, are formally valued every year. Other material plans, accounting for a further 12% of the liabilities, have their liabilities updated each year. Group policy for the remaining plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year.
For defined contribution plans, the charges to the income statement are the company contributions payable, as the company’s obligation is limited to the contributions paid into the plans. The assets and liabilities of such plans are not included in the balance sheet of the Group.
|
Description of plans
The Group increasingly operates a number of defined contribution plans, the assets of which are held in external funds. In certain countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The majority of defined benefit plans are either career average, final salary or hybrid plans and operate on a funded basis with assets held in external funds. Benefits are determined by the plan rules and are linked to inflation in some countries. Our largest plans are in the UK and Netherlands. In the UK, we operate a combination of an open career average defined benefit plan with a salary limit for benefit accrual, and a defined contribution plan. In the Netherlands, we operate a collective defined contribution plan for all new benefit accrual and a closed career average defined benefit plan for benefits built up to April 2015.
The Group also provides other post-employment benefits, mainly post-employment healthcare plans in the United States. These plans are predominantly unfunded.
Governance
The majority of the Group’s externally funded plans are established as trusts, foundations or similar entities. The operation of these entities is governed by local regulations and practice in each country, as is the nature of the relationship between the Group and the Trustees (or equivalent) and their composition. Where Trustees (or equivalent) are in place to operate plans, they are generally required to act on behalf of the plan’s stakeholders. They are tasked with periodic reviews of the solvency of the fund in accordance with local legislation and play a role in the long-term investment and funding strategy. The Group also has an internal body, the Pensions and Equity Committee, that is responsible for setting the company’s policies and decision-making on plan matters, including but not limited to design, funding, investments, risk management and governance.
Investment strategy
The Group’s investment strategy in respect of its funded plans is implemented within the framework of the various statutory requirements of the territories where the plans are based. The Group has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Group of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. The plans continue to invest a good proportion of the assets in equities, which the Group believes offer the best returns over the long term, commensurate with an acceptable level of risk. The plans expose the Group to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and, in certain markets, inflation risk. There are no unusual entity or plan-specific risks to the Group. For risk control, the pension funds also have significant investments in liability matching assets (bonds) as well as in property and other alternative assets; additionally, the Group uses derivatives to further mitigate the impact of the risks outlined above. The majority of assets are managed by a number of external fund managers with a small proportion managed in-house. Unilever has a pooled investment vehicle (Univest) which it believes offers its pension plans around the world a simplified externally managed investment vehicle to implement their strategic asset allocation models, currently for bonds, equities and alternative assets. The aim is to provide high-quality, well diversified, cost-effective, risk-controlled vehicles. The pension plans’ investments are overseen by Unilever’s internal investment company, the Univest Company.
Assumptions
With the objective of presenting the assets and liabilities of the pensions and other post-employment benefit plans at their fair value on the balance sheet, assumptions under IAS 19 are set by reference to market conditions at the valuation date. The actuarial assumptions used to calculate the benefit liabilities vary according to the country in which the plan is situated. The following table shows the assumptions, weighted by liabilities, used to value the principal defined benefit plans (representing approximately 96% of total pension liabilities and other post-employment benefit liabilities).
31 December 2019 | 31 December 2018 | |||||||||||||||
Defined benefit pension plans |
Other post- employment benefit plans |
Defined benefit pension plans |
Other post- employment benefit plans |
|||||||||||||
Discount rate | 1.9% | 3.9% | 2.7% | 4.8% | ||||||||||||
Inflation | 2.3% | n/a | 2.5% | n/a | ||||||||||||
Rate of increase in salaries | 2.9% | 3.0% | 2.8% | 3.0% | ||||||||||||
Rate of increase for pensions in payment (where provided) | 2.2% | n/a | 2.4% | n/a | ||||||||||||
Rate of increase for pensions in deferment (where provided) | 2.4% | n/a | 2.6% | n/a | ||||||||||||
Long-term medical cost inflation |
n/a | 5.4% | n/a | 5.3% |
The valuations of other post-employment benefit plans generally assume a higher initial level of medical cost inflation, which falls from 7% to the long-term rate within the next five years. Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans.
98 | Annual Report on Form 20-F 2019 |
Financial Statements |
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4B. Pensions and similar obligations continued
For the UK and Netherlands pension plans, representing approximately 69% of all defined benefit pension liabilities, the assumptions used at 31 December 2019 and 2018 were:
United Kingdom | Netherlands | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Discount rate | 2.0% | 2.8% | 1.1% | 1.8% | ||||||||||||
Inflation | 2.9% | 3.2% | 1.5% | 1.6% | ||||||||||||
Rate of increase in salaries | 3.2% | 3.1% | 2.0% | 2.1% | ||||||||||||
Rate of increase for pensions in payment | ||||||||||||||||
(where provided) |
2.8% | 3.1% | 1.5% | 1.6% | ||||||||||||
Rate of increase for
pensions in deferment |
2.8% | 3.1% | 1.5% | 1.6% | ||||||||||||
Number of years a current pensioner is |
||||||||||||||||
Men |
21.6 | 22.1 | 22.6 | 22.5 | ||||||||||||
Women |
23.4 | 24.0 | 24.1 | 24.0 | ||||||||||||
Number of years a future pensioner currently |
||||||||||||||||
Men |
22.6 | 22.7 | 24.5 | 24.4 | ||||||||||||
Women |
24.6 | 25.6 | 26.2 | 26.1 |
Demographic assumptions, such as mortality rates, are set with having regard to the latest trends in life expectancy (including expectations of future improvements), plan experience and other relevant data. These assumptions are reviewed and updated as necessary as part of the periodic actuarial valuation of the pension plans. The years of life expectancy for 2019 above have been translated from the following tables:
UK: The year of use S3 series all pensioners (“S3PMA” and “S3PFA_M”) tables have been adopted, which are based on the experience of UK pension schemes over the period 2009-2016. Scaling factors are applied reflecting the experience of our pension funds appropriate to the member’s gender and status. Future improvements in longevity have been allowed for in line with the 2018 CMI core projections (Sk = 7.0 and “A” parameter = 0.0%) and a 1.0% long-term improvement rate.
Netherlands: The Dutch Actuarial Society’s AG Prognosetafel 2018 table is used with correction factors (2017) to allow for the typically longer life expectancy for fund members relative to the general population. This table has an in-built allowance for future improvements in longevity.
The remaining defined benefit plans are considered immaterial. Their assumptions vary due to a number of factors including the currency and long-term economic conditions of the countries where they are situated.
Income statement
The charge to the income statement comprises:
Notes |
€ million 2019 |
€ million 2018 |
€ million 2017 |
|||||||||||||
Charged to operating profit: |
||||||||||||||||
Defined benefit pension and other benefit plans: |
||||||||||||||||
Current service cost |
(216 | ) | (220 | ) | (245 | ) | ||||||||||
Employee contributions |
17 | 17 | 18 | |||||||||||||
Special termination benefits |
(5 | ) | (16 | ) | (4 | ) | ||||||||||
Past service cost including (losses)/gains on curtailments |
65 | (41 | ) | 23 | ||||||||||||
Settlements |
(2 | ) | – | 4 | ||||||||||||
Defined contribution plans |
(193 | ) | (179 | ) | (195 | ) | ||||||||||
Total operating cost |
4A | (334 | ) | (439 | ) | (399 | ) | |||||||||
Finance income/(cost) |
5 | (30 | ) | (25 | ) | (96 | ) | |||||||||
Net impact on the income statement (before tax) |
(364 | ) | (464 | ) | (495 | ) |
Statement of comprehensive income
Amounts recognised in the statement of comprehensive income on the remeasurement of the net defined benefit liability.
€ million 2019 |
€ million 2018 |
€ million 2017 |
||||||||||
Return on plan assets excluding amounts included in net finance income/(cost) | 2,385 | (1,108 | ) | 1,475 | ||||||||
Actuarial gains/(losses) arising from changes in demographic assumptions | 183 | 42 | 222 | |||||||||
Actuarial gains/(losses) arising from changes in financial assumptions | (2,138 | ) | 611 | (210 | ) | |||||||
Experience gains/(losses) arising on pension plan and other benefit plan liabilities | (12 | ) | 18 | 133 | ||||||||
Change in asset ceiling, excluding amounts included in finance cost | (37 | ) | – | – | ||||||||
Total of defined benefit costs recognised in other comprehensive income |
381 | (437 | ) | 1,620 |
Annual Report on Form 20-F 2019 | 99 |
Notes to the Consolidated Financial Statements
Unilever Group continued
4B. Pensions and similar obligations continued
Balance sheet
The assets, liabilities and surplus/(deficit) position of the pension and other post-employment benefit plans at the balance sheet date were:
€ million 2019 | € million 2018 | |||||||||||||||
Pension plans | Other post- employment benefit plans |
Pension plans | Other post- employment benefit plans |
|||||||||||||
Fair value of assets | 23,749 | 14 | 20,867 | 13 | ||||||||||||
Present value of liabilities | (23,438 | ) | (484 | ) | (21,288 | ) | (466 | ) | ||||||||
Computed net assets/(liabilities) | 311 | (470 | ) | (421 | ) | (453 | ) | |||||||||
Irrecoverable surplus(a) | (37 | ) | – | – | – | |||||||||||
Net pension assets/(liabilities) |
274 | (470 | ) | (421 | ) | (453 | ) | |||||||||
Of which in respect of: | ||||||||||||||||
Funded plans in surplus: |
||||||||||||||||
Liabilities |
(17,772 | ) | – | (16,182 | ) | – | ||||||||||
Assets |
20,229 | 2 | 17,909 | 1 | ||||||||||||
Aggregate Surplus: |
2,457 | 2 | 1,727 | 1 | ||||||||||||
Irrecoverable surplus |
(37 | ) | – | – | – | |||||||||||
Pension asset net of liabilities |
2,420 | 2 | 1,727 | 1 | ||||||||||||
Funded plans in deficit: |
||||||||||||||||
Liabilities |
(4,657 | ) | (32 | ) | (4,149 | ) | (30 | ) | ||||||||
Assets |
3,520 | 12 | 2,958 | 12 | ||||||||||||
Pension liability net of assets |
(1,137 | ) | (20 | ) | (1,191 | ) | (18 | ) | ||||||||
Unfunded plans: |
||||||||||||||||
Pension liability |
(1,009 | ) | (452 | ) | (957 | ) | (436 | ) |
(a) | A surplus is deemed recoverable to the extent that the Group can benefit economically from the surplus. Unilever assesses the maximum economic benefit available through a combination of refunds and reductions in future contributions in accordance with local legislation and individual financing arrangements with each of our funded defined benefit plans. |
Reconciliation of change in assets and liabilities
Movements in assets during the year:
The group of plans within ‘Rest of world’ category in the tables below are not materially different with respect to their risks that would require disaggregated disclosure.
UK | Netherlands | Rest of world |
€ million 2019 Total |
UK | Netherlands | Rest of world |
€ million 2018 Total |
|||||||||||||||||||||||||
1 January | 10,329 | 4,996 | 5,555 | 20,880 | 11,038 | 5,357 | 5,987 | 22,382 | ||||||||||||||||||||||||
Employee contributions | – | – | 17 | 17 | – | – | 17 | 17 | ||||||||||||||||||||||||
Settlements | – | – | – | – | – | – | (1 | ) | (1 | ) | ||||||||||||||||||||||
Actual return on plan assets (excluding amounts in net finance income/charge) | 1,233 | 588 | 564 | 2,385 | (459 | ) | (303 | ) | (346 | ) | (1,108 | ) | ||||||||||||||||||||
Change in asset ceiling, excluding amounts included in finance cost | – | – | (37 | ) | (37 | ) | – | – | – | – | ||||||||||||||||||||||
Interest income | 292 | 89 | 192 | 573 | 274 | 95 | 182 | 551 | ||||||||||||||||||||||||
Employer contributions | 94 | 14 | 293 | 401 | 95 | 14 | 274 | 383 | ||||||||||||||||||||||||
Benefit payments | (455 | ) | (165 | ) | (588 | ) | (1,208 | ) | (472 | ) | (166 | ) | (561 | ) | (1,199 | ) | ||||||||||||||||
Currency retranslation | 629 | – | 84 | 713 | (147 | ) | – | 12 | (135 | ) | ||||||||||||||||||||||
Others | – | – | 2 | 2 | – | (1 | ) | (9 | ) | (10 | ) | |||||||||||||||||||||
31 December |
12,122 | 5,522 | 6,082 | 23,726 | 10,329 | 4,996 | 5,555 | 20,880 |
100 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
4B. Pensions and similar obligations continued
Movements in liabilities during the year:
UK |
Netherlands |
Rest of world |
€ million 2019 Total |
UK |
Netherlands |
Rest of world |
€ million 2018 Total |
|||||||||||||||||||||||||
1 January |
(9,739 | ) | (4,664 | ) | (7,351 | ) | (21,754 | ) | (10,255 | ) | (4,913 | ) | (7,775 | ) | (22,943 | ) | ||||||||||||||||
Current service cost |
(104 | ) | (4 | ) | (108 | ) | (216 | ) | (109 | ) | (4 | ) | (107 | ) | (220 | ) | ||||||||||||||||
Special termination benefits |
– | – | (5 | ) | (5 | ) | – | – | (16 | ) | (16 | ) | ||||||||||||||||||||
Past service costs including (losses)/gains on curtailments |
56 | – | 9 | 65 | (46 | ) | 8 | (3 | ) | (41 | ) | |||||||||||||||||||||
Settlements |
– | – | (2 | ) | (2 | ) | – | – | 1 | 1 | ||||||||||||||||||||||
Interest cost |
(276 | ) | (82 | ) | (245 | ) | (603 | ) | (254 | ) | (87 | ) | (235 | ) | (576 | ) | ||||||||||||||||
Actuarial gain/(loss) arising from changes in demographic assumptions |
157 | 14 | 12 | 183 | – | 53 | (11 | ) | 42 | |||||||||||||||||||||||
Actuarial gain/(loss) arising from changes in financial assumptions |
(955 | ) | (511 | ) | (672 | ) | (2,138 | ) | 351 | 84 | 176 | 611 | ||||||||||||||||||||
Actuarial gain/(loss) arising from experience adjustments |
(44 | ) | (15 | ) | 47 | (12 | ) | (45 | ) | 37 | 26 | 18 | ||||||||||||||||||||
Benefit payments |
455 | 165 | 588 | 1,208 | 472 | 166 | 561 | 1,199 | ||||||||||||||||||||||||
Currency retranslation |
(551 | ) | – | (77 | ) | (628 | ) | 147 | – | 14 | 161 | |||||||||||||||||||||
Others |
– | – | (20 | ) | (20 | ) | – | (8 | ) | 18 | 10 | |||||||||||||||||||||
31 December |
(11,001 | ) | (5,097 | ) | (7,824 | ) | (23,922 | ) | (9,739 | ) | (4,664 | ) | (7,351 | ) | (21,754 | ) |
Movements in (deficit)/surplus during the year:
UK | Netherlands | Rest of world |
€ million 2019 Total |
UK | Netherlands | Rest of world |
€ million 2018 Total |
|||||||||||||||||||||||||
1 January |
590 | 332 | (1,796 | ) | (874 | ) | 783 | 444 | (1,788 | ) | (561 | ) | ||||||||||||||||||||
Current service cost |
(104 | ) | (4 | ) | (108 | ) | (216 | ) | (109 | ) | (4 | ) | (107 | ) | (220 | ) | ||||||||||||||||
Employee contributions |
– | – | 17 | 17 | – | – | 17 | 17 | ||||||||||||||||||||||||
Special termination benefits |
– | – | (5 | ) | (5 | ) | – | – | (16 | ) | (16 | ) | ||||||||||||||||||||
Past service costs including (losses)/gains on curtailments |
56 | – | 9 | 65 | (46 | ) | 8 | (3 | ) | (41 | ) | |||||||||||||||||||||
Settlements |
– | – | (2 | ) | (2 | ) | – | – | – | – | ||||||||||||||||||||||
Actual return on plan assets (excluding amounts in net finance income/charge) |
1,233 | 588 | 564 | 2,385 | (459 | ) | (303 | ) | (346 | ) | (1,108 | ) | ||||||||||||||||||||
Interest cost |
(276 | ) | (82 | ) | (245 | ) | (603 | ) | (254 | ) | (87 | ) | (235 | ) | (576 | ) | ||||||||||||||||
Interest income |
292 | 89 | 192 | 573 | 274 | 95 | 182 | 551 | ||||||||||||||||||||||||
Actuarial gain/(loss) arising from changes in demographic assumptions |
157 | 14 | 12 | 183 | – | 53 | (11 | ) | 42 | |||||||||||||||||||||||
Actuarial gain/(loss) arising from changes in financial assumptions |
(955 | ) | (511 | ) | (672 | ) | (2,138 | ) | 351 | 84 | 176 | 611 | ||||||||||||||||||||
Actuarial gain/(loss) arising from experience adjustments |
(44 | ) | (15 | ) | 47 | (12 | ) | (45 | ) | 37 | 26 | 18 | ||||||||||||||||||||
Employer contributions |
94 | 14 | 293 | 401 | 95 | 14 | 274 | 383 | ||||||||||||||||||||||||
Benefit payments |
– | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Currency retranslation |
78 | – | 7 | 85 | – | – | 26 | 26 | ||||||||||||||||||||||||
Change in asset ceiling, excluding amounts included in finance cost |
– | – | (37 | ) | (37 | ) | – | – | – | – | ||||||||||||||||||||||
Others |
– | – | (18 | ) | (18 | ) | – | (9 | ) | 9 | – | |||||||||||||||||||||
31 December |
1,121 | 425 | (1,742 | ) | (196 | ) | 590 | 332 | (1,796 | ) | (874 | ) |
The actual return on plan assets during 2019 was €2,958 million, being €2,385 million of asset returns and € 573 million of interest income shown in the tables above (2018: €(557) million).
Movements in irrecoverable surplus during the year:
UK | Netherlands | Rest of world |
€ million 2019 Total |
UK | Netherlands | Rest of world |
€ million 2018 Total |
|||||||||||||||||||||||||
1 January |
– | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Change in asset ceiling, excluding amounts included in finance cost |
– | – | (37 | ) | (37 | ) | – | – | – | – | ||||||||||||||||||||||
31 December |
– | – | (37 | ) | (37 | ) | – | – | – | – |
No amounts were included in finance cost in respect of irrecoverable surplus in 2019 or 2018.
Annual Report on Form 20-F 2019 | 101 |
Notes to the Consolidated Financial Statements
Unilever Group continued
4B. Pensions and similar obligations continued
The duration of the principal defined benefit plan liabilities (representing 96% of total pension liabilities and other post-employment benefit liabilities) and the split of liabilities between different categories of plan participants are:
UK | Netherlands | Rest
of world(a) |
2019 Total |
UK | Netherlands | Rest of world(a) |
2018 Total |
|||||||||||||||||||||||||
Duration (years) | 18 | 19 | 13 | 7 to 23 | 17 | 18 | 12 | 7 to 23 | ||||||||||||||||||||||||
Active members | 14% | 14% | 21% | 16% | 12% | 15% | 21% | 15% | ||||||||||||||||||||||||
Deferred members | 34% | 41% | 17% | 31% | 33% | 38% | 16% | 29% | ||||||||||||||||||||||||
Retired members | 52% | 45% | 62% | 53% | 55% | 47% | 63% | 56% |
(a) | Rest of world numbers shown are weighted averages by liabilities. |
Plan assets
The fair value of plan assets, which are reported net of fund liabilities that are not employee benefits, at the end of the reporting period for each category are as follows:
The group of plans within “Rest of world” category in the tables below are not materially different with respect to their risks that would require disaggregated disclosure.
€ million 31 December 2019 |
€ million 31 December 2018 |
|||||||||||||||||||||||||||||||
UK | Netherlands | Rest of world |
2019 Total |
UK | Netherlands | Rest of world |
2018 Total |
|||||||||||||||||||||||||
Total plan assets | 12,122 | 5,522 | 6,105 | 23,749 | 10,329 | 4,996 | 5,542 | 20,867 | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Equities total | 4,173 | 1,831 | 1,752 | 7,756 | 3,182 | 1,594 | 1,505 | 6,281 | ||||||||||||||||||||||||
Europe |
930 | 517 | 583 | 2,030 | 731 | 480 | 451 | 1,662 | ||||||||||||||||||||||||
North America |
2,312 | 825 | 707 | 3,844 | 1,723 | 714 | 682 | 3,119 | ||||||||||||||||||||||||
Other |
931 | 489 | 462 | 1,882 | 728 | 400 | 372 | 1,500 | ||||||||||||||||||||||||
Fixed income total | 5,317 | 2,795 | 3,250 | 11,362 | 4,963 | 2,595 | 2,947 | 10,505 | ||||||||||||||||||||||||
Government bonds |
2,711 | 765 | 1,369 | 4,845 | 2,474 | 769 | 1,253 | 4,496 | ||||||||||||||||||||||||
Investment grade corporate bonds |
1,120 | 542 | 1,272 | 2,934 | 984 | 502 | 1,167 | 2,653 | ||||||||||||||||||||||||
Other fixed income |
1,486 | 1,488 | 609 | 3,583 | 1,505 | 1,324 | 527 | 3,356 | ||||||||||||||||||||||||
Private equity | 325 | 65 | 6 | 396 | 363 | 82 | 2 | 447 | ||||||||||||||||||||||||
Property and real estate | 916 | 491 | 321 | 1,728 | 852 | 451 | 276 | 1,579 | ||||||||||||||||||||||||
Hedge funds | 688 | – | 69 | 757 | 663 | – | 120 | 783 | ||||||||||||||||||||||||
Other | 454 | 289 | 415 | 1,158 | 435 | 293 | 389 | 1,117 | ||||||||||||||||||||||||
Other plans | – | – | 300 | 300 | – | – | 312 | 312 | ||||||||||||||||||||||||
Assets/fund (liabilities) that are not employee benefits | ||||||||||||||||||||||||||||||||
Derivatives | 249 | 51 | (8 | ) | 292 | (129 | ) | (19 | ) | (9 | ) | (157 | ) |
The fair values of the above equity and fixed income instruments are determined based on quoted market prices in active markets. The fair value of private equity, properties, derivatives and hedge funds are not based on quoted market prices in active markets. The Group uses derivatives and other instruments to hedge some of its exposure to inflation and interest rate risk – the degree of this hedging of liabilities was 55% for interest rate and 55% for inflation for the UK plan and 32% for interest rate and 20% for inflation for the Netherlands plan. Foreign currency exposures in part are also hedged by the use of forward foreign exchange contracts. Assets included in the Other category are commodities, cash and insurance contracts which are also unquoted assets.
Equity securities include Unilever securities amounting to €12 million (0.05% of total plan assets) and €12 million (0.1% of total plan assets) at 31 December 2019 and 2018 respectively. Property includes property occupied by Unilever amounting to €30 million at 31 December 2019 (2018: €28 million).
The pension assets above exclude the assets in a Special Benefits Trust amounting to €54 million (2018: €59 million) to fund pension and similar liabilities in the United States (see also note 17A on page 129).
Sensitivities
The sensitivity of the overall pension liabilities to changes in the weighted key assumptions are:
Change in liabilities | ||||||||||||||||
Change in assumption | UK | Netherlands | Total | |||||||||||||
Discount rate | Increase by 0.5% | -8% | -9% | -8% | ||||||||||||
Inflation rate | Increase by 0.5% | 6% | 9% | 6% | ||||||||||||
Life expectancy | Increase by 1 year | 5% | 5% | 5% | ||||||||||||
Long-term medical cost inflation(b) |
Increase by 1.0% | 0% | 0% | 3% |
(b) | Long-term medical cost inflation only relates to post-retirement medical plans. |
An equivalent decrease in each assumption would have an equal and opposite impact on liabilities.
102 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
4B. Pensions and similar obligations continued
The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.
Cash flow
Group cash flow in respect of pensions and similar post-employment benefits comprises company contributions paid to funded plans and benefits paid by the company in respect of unfunded plans. The table below sets out these amounts:
€ million 2020 Estimate |
€ million
|
€ million
|
€ million
|
|||||||||||||
Company contributions to funded plans: | ||||||||||||||||
Defined benefit(a) | 340 | 244 | 238 | 954 | ||||||||||||
Defined contributions | 210 | 193 | 179 | 195 | ||||||||||||
Benefits paid by the company in respect of unfunded plans: | ||||||||||||||||
Defined benefit | 150 | 157 | 144 | 151 | ||||||||||||
Group cash flow in respect of pensions and similar benefits | 700 | 594 | 561 | 1,300 |
(a) | Following the conclusion of the 2019 Funding valuation of the US Unicare Pension plan, the Group will contribute $100 million into the plan in 2020. Deficit contributions to the US pension plan are expected to be nil for the following few years. Following the conclusion of the 2016 triennial valuation of the UK pension fund the Group, in agreement with the trustees, decided to contribute £600 million into the fund in 2017. Following conclusion of the 2019 triennial valuation of the UK pension fund, deficit contributions to this fund are expected to be nil for the next few years. |
The Group’s funding policy is to periodically review the contributions made to the plans while taking account of local legislations.
4C. Share-based compensation plans
The fair value of awards at grant date is calculated using observable market price. This value is expensed over their vesting period, with a corresponding credit to equity. The expense is reviewed and adjusted to reflect changes to the level of awards expected to vest, except where this arises from a failure to meet a market condition. Any cancellations are recognised immediately in the income statement.
|
As at 31 December 2019 the Group had share-based compensation plans in the form of performance shares and other share awards.
The numbers in this note include those for Executive Directors and key management shown in note 4A on page 97. Non-Executive Directors do not participate in any of the share-based compensation plans.
The charge in each of the last three years is shown below, and relates to equity-settled plans:
Income statement charge | € million 2019 |
€ million 2018 |
€ million 2017 |
|||||||||
Performance share plans | (142 | ) | (183 | ) | (273 | ) | ||||||
Other plans | (9 | ) | (13 | ) | (11 | ) | ||||||
(151 | ) | (196 | ) | (284 | ) |
Performance share plans
Performance share awards are made in respect of the Management Co-Investment Plan (MCIP). Awards for the Global Share Incentive Plan (GSIP) were last made in February 2018 and will vest in February 2021. No further GSIP awards will be made. The awards of each plan will vest between 0 and 200% of grant level, subject to the level of satisfaction of performance measures (limits for Executive Directors may vary.
The MCIP allows Unilever’s managers to invest up to 100% of their annual bonus (a minimum of 33% and maximum of 67% for Executive Directors) in shares in Unilever, and to receive a corresponding award of performance-related shares. The performance measures for MCIP are underlying sales growth, underlying EPS growth, return on invested capital and sustainability progress index for the Group. MCIP awards will vest after four years.
Under the GSIP, Unilever’s managers received annual awards of NV and PLC shares. The performance measures for GSIP are underlying sales growth, underlying operating margin, and cumulative operating cash flow for the Group. There is an additional target based on relative total shareholder return for senior executives. GSIP awards will vest after three years.
A summary of the status of the Performance Share Plans as at 31 December 2019, 2018 and 2017 and changes during the years ended on these dates is presented below:
2019 Number of shares |
2018 Number of shares |
2017 Number of shares |
||||||||||
Outstanding at 1 January | 13,634,518 | 13,684,747 | 14,818,060 | |||||||||
Awarded | 4,538,771 | 6,870,882 | 4,962,345 | |||||||||
Vested | (6,041,011 | ) | (5,854,388 | ) | (4,723,861 | ) | ||||||
Forfeited | (994,477 | ) | (1,066,723 | ) | (1,371,797 | ) | ||||||
Outstanding at 31 December |
11,137,801 | 13,634,518 | 13,684,747 |
Annual Report on Form 20-F 2019 | 103 |
Notes to the Consolidated Financial Statements
Unilever Group continued
4C. Share-based compensation plans continued
Share award value information | 2019 | 2018 | 2017 | |||||||||
Fair value per share award during the year |
€48.22 | €42.44 | €42.59 |
Additional information
At 31 December 2019 shares and options in NV or PLC totalling 11,944,106 (2018: 14,595,111) were outstanding in respect of share-based compensation plans of NV, PLC and its subsidiaries, including North American plans.
To satisfy the options and awards granted, certain NV group companies hold 12,419,009 (2018: 15,010,429) ordinary shares of NV or PLC. Shares acquired during 2019 represent 0.14% of the Group’s called up share capital. The balance of shares held in connection with share plans at 31 December 2019 represented 0.47% (2018: 0.5%) of the Group’s called up share capital.
The book value of €640 million (2018: €704 million) of all shares held in respect of share-based compensation plans for both NV and PLC is eliminated on consolidation by deduction from other reserves. Their market value at 31 December 2019 was €635 million (2018: €700 million).
At 31 December 2019 the exercise price of nil PLC and NV options (2018: nil) were above the market price of the shares.
Shares held to satisfy options and awards are accounted for in accordance with IAS 32 ‘Financial Instruments: Presentation’. All differences between the purchase price of the shares held to satisfy options and awards granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves.
Between 31 December 2019 and 20 February 2020 (the latest practicable date for inclusion in this report), nil shares were granted, 2,848,795 shares were vested and 123,506 shares were forfeited related to the Performance Share Plans.
5. Net finance costs
Net finance costs are comprised of finance costs and finance income, including net finance costs in relation to pensions and similar obligations.
Finance income includes income on cash and cash equivalents and income on other financial assets. Finance costs include interest costs in relation to financial liabilities. This includes interest on lease liabilities which represents the unwind of the discount rate applied to lease liabilities.
Borrowing costs are recognised based on the effective interest method.
|
Net finance costs | Notes |
€ million 2019
|
€ million 2018 (Restated)(a) |
€ million 2017 (Restated)(a) |
||||||||||||
Finance costs | (821 | ) | (718 | ) | (683 | ) | ||||||||||
Bank loans and overdrafts |
(46 | ) | (44 | ) | (46 | ) | ||||||||||
Interest on bonds and other loans(b) |
(617 | ) | (560 | ) | (519 | ) | ||||||||||
Interest on lease liabilities |
(100 | ) | (127 | ) | (127 | ) | ||||||||||
Dividends paid on preference shares(c) |
– | – | (4 | ) | ||||||||||||
Net gain/(loss) on transactions for which hedge accounting is not applied |
(58 | ) | 13 | 13 | ||||||||||||
On foreign exchange derivatives |
(321 | ) | 144 | 384 | ||||||||||||
Exchange difference on underlying items(d) |
263 | (131 | ) | (371 | ) | |||||||||||
Finance income(e) | 224 | 135 | 157 | |||||||||||||
Pensions and similar obligations | 4B | (30 | ) | (25 | ) | (96 | ) | |||||||||
Net finance costs before non-underlying items(f) | (627 | ) | (608 | ) | (622 | ) | ||||||||||
Premium paid on buyback of preference shares | – | – | (382 | ) | ||||||||||||
(627 | ) | (608 | ) | (1004 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Interest on bonds and other loans includes the impact of interest rate derivatives that are part of hedge accounting relationships and the related recycling of results from the hedge accounting reserve. Includes an amount of €(6) million (2018: €(15) million) relating to unwinding of discount on deferred consideration for acquisitions and €Nil million (2018: €38 million) release of provision for interest on indirect tax cases in Brazil for which a federal tax amnesty has been applied. |
(c) | Preference shares were repurchased in 2017. |
(d) | 2019 includes €40 million (2018: Nil) finance cost due to change in functional currency in group’s operating entities in Zimbabwe from US dollar to RTGS dollar. For further details of derivatives for which hedge accounting is not applied, please refer to note 16C. |
(e) | Includes an amount of €70 million (2018: Nil) that relates to interest on tax settlement in Brazil. |
(f) | See note 3 for explanation of non-underlying items. |
104 | Annual Report on Form 20-F 2019 |
Financial Statements |
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6. Taxation
6A. Income tax
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years.
Current tax in the consolidated income statement will differ from the income tax paid in the consolidated cash flow statement primarily because of deferred tax arising on temporary differences and payment dates for income tax occurring after the balance sheet date.
Unilever is subject to taxation in the many countries in which it operates. The tax legislation of these countries differs, is often complex and is subject to interpretation by management and the government authorities. These matters of judgement give rise to the need to create provisions for tax payments that may arise in future years with respect to transactions already undertaken. Provisions are made against individual exposures and take into account the specific circumstances of each case, including the strength of technical arguments, recent case law decisions or rulings on similar issues and relevant external advice. The provision is estimated based on one of two methods, the expected value method (the sum of the probability weighted amounts in a range of possible outcomes) or the single most likely amount method, depending on which is expected to better predict the resolution of the uncertainty.
|
Tax charge in income statement | €
million 2019 |
€ million 2018 (Restated)(a) |
€ million 2017 (Restated)(a) |
|||||||||
Current tax | ||||||||||||
Current year | (2,098 | ) | (2,647 | ) | (2,398 | ) | ||||||
Over/(under) provided in prior years | 119 | (10 | ) | (21 | ) | |||||||
(1,979 | ) | (2,657 | ) | (2,419 | ) | |||||||
Deferred tax | ||||||||||||
Origination and reversal of temporary differences | (255 | ) | 5 | 53 | ||||||||
Changes in tax rates | (59 | ) | (12 | ) | 604 | |||||||
Recognition of previously unrecognised losses brought forward | 30 | 92 | 92 | |||||||||
(284 | ) | 85 | 749 | |||||||||
(2,263 | ) | (2,572 | ) | (1,670 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
The reconciliation between the computed weighted average rate of income tax expense, which is generally applicable to Unilever companies, and the actual rate of taxation charged is as follows:
Reconciliation of effective tax rate | % 2019 |
% 2018 (Restated)(a) |
% 2017 (Restated)(a) |
|||||||||
Computed rate of tax(b) | 24 | 25 | 26 | |||||||||
Differences between computed rate of tax and effective tax rate due to: | ||||||||||||
Incentive tax credits |
(2 | ) | (3 | ) | (4 | ) | ||||||
Withholding tax on dividends |
3 | 2 | 2 | |||||||||
Expenses not deductible for tax purposes |
1 | 1 | 1 | |||||||||
Irrecoverable withholding tax |
1 | 1 | 1 | |||||||||
Income tax reserve adjustments – current and prior year |
– | 1 | – | |||||||||
Transfer to/(from) unrecognised deferred tax assets |
(2 | ) | – | 1 | ||||||||
Others |
1 | (1 | ) | (1 | ) | |||||||
Underlying effective tax rate | 26 | 26 | 26 | |||||||||
Non-underlying items within operating profit(c) |
– | (1 | ) | 1 | ||||||||
Premium paid on Buyback of preference shares(c) |
– | – | 1 | |||||||||
Impact of US tax reform(c) |
– | – | (7 | ) | ||||||||
Impact of Spreads disposal(c) |
– | (4 | ) | – | ||||||||
Taxes related to the reorganisation of our European business(c) |
2 | – | – | |||||||||
Effective tax rate | 28 | 21 | 21 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | The computed tax rate used is the average of the standard rate of tax applicable in the countries in which Unilever operates, weighted by the amount of underlying profit before taxation generated in each of those countries. For this reason, the rate may vary from year to year according to the mix of profit and related tax rates. |
(c) | See note 3 for explanation of non-underlying items. |
Our tax rate is reduced by incentive tax credits, the benefit from preferential tax regimes that have been legislated by the countries and provinces concerned in order to promote economic development and investment. The tax rate is increased by business expenses which are not deductible for tax, such as entertainment costs and some interest expense and by irrecoverable withholding taxes on dividends paid by subsidiary companies and on other cross-border payments such as royalties and service fees, which cannot be offset against other taxes due. Uncertain tax provisions including the related interest and penalties amounted to €787 million (2018: €716 million). Whilst the potential outcomes for the tax matters giving rise to this provision are highly variable our expectation is that there will be no material change to any of the amounts provided for in the 12 months from 31 December 2019. In 2018 the effective tax rate was reduced by the impact of the spreads disposals where a significant part of the disposals benefited from the participation exemption in the Netherlands.
The Group’s future tax charge and effective tax rate could be affected by several factors, including changes in tax laws and their interpretation and still to be determined tax reform proposals in the EU, Switzerland and the continuing OECD international tax reform work, as well as the impact of acquisitions, disposals and any restructuring of our businesses.
In September, India announced a change in tax legislation backdated to 1 April 2019. The favourable impact for Unilever of a reduction in the tax rate to 25.17% was partially offset by the reduction in various tax incentives.
Annual Report on Form 20-F 2019 | 105 |
Notes to the Consolidated Financial Statements
Unilever Group continued
6B. Deferred tax
Deferred tax is recognised using the liability method on taxable temporary differences between the tax base and the accounting base of items included in the balance sheet of the Group. Certain temporary differences are not provided for as follows: • goodwill not deductible for tax purposes; • the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and • differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, at the year end.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
|
Movements in 2019 and 2018 | € million As at 1 January 2019 |
€ million Income statement |
€ million Other |
€ million As at |
€ million As at 1 January 2018 (Restated)(a) |
€ million Income statement
(Restated)(a) |
€ million
(Restated)(a) |
€
million As at 31 December 2018 (Restated)(a) |
||||||||||||||||||||||||
Pensions and similar obligations | 404 | (81 | ) | (51 | ) | 272 | 316 | (26 | ) | 114 | 404 | |||||||||||||||||||||
Provisions and accruals | 821 | (73 | ) | 8 | 756 | 653 | 193 | (25 | ) | 821 | ||||||||||||||||||||||
Goodwill and intangible assets | (1,911 | ) | (31 | ) | (154 | ) | (2,096 | ) | (1,652 | ) | (154 | ) | (105 | ) | (1,911 | ) | ||||||||||||||||
Accelerated tax depreciation | (679 | ) | 12 | (18 | ) | (685 | ) | (679 | ) | 5 | (5 | ) | (679 | ) | ||||||||||||||||||
Tax losses | 130 | 63 | (9 | ) | 184 | 130 | 11 | (11 | ) | 130 | ||||||||||||||||||||||
Fair value gains | 155 | (200 | ) | (5 | ) | (50 | ) | 100 | 58 | (3 | ) | 155 | ||||||||||||||||||||
Fair value losses | 22 | (2 | ) | (5 | ) | 15 | 24 | (2 | ) | - | 22 | |||||||||||||||||||||
Share-based payments | 175 | (39 | ) | 20 | 156 | 194 | (14 | ) | (5 | ) | 175 | |||||||||||||||||||||
Other | 77 | 73 | 11 | 161 | 86 | 11 | (20 | ) | 77 | |||||||||||||||||||||||
Lease liability | 428 | (113 | ) | 4 | 319 | 441 | 2 | (15 | ) | 428 | ||||||||||||||||||||||
Right of use asset | (370 | ) | 107 | (6 | ) | (269 | ) | (383 | ) | 1 | 12 | (370 | ) | |||||||||||||||||||
(748 | ) | (284 | ) | (205 | ) | (1,237 | ) | (770 | ) | 85 | (63 | ) | (748 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
At the balance sheet date, the Group had unused tax losses of €4,790 million (2018: €5,346 million) and tax credits amounting to €524 million (2018: €570 million) available for offset against future taxable profits. Deferred tax assets have not been recognised in respect of unused tax losses of €4,272 million (2018: €4,914 million) and tax credits of €497 million (2018: €570 million), as it is not probable that there will be future taxable profits within the entities against which the losses can be utilised. Of these losses €4,108 million (2018: €4,752 million) have expiry dates, the majority being corporate income tax losses in the Netherlands which expire between now and 2026.
Other deductible temporary differences of €48 million (2018: €48 million) have not been recognised as a deferred tax asset. There is no expiry date for these differences.
At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was €2,476 million (2018: €2,681 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences, and it is probable that such differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet:
Deferred tax assets and liabilities | € million Assets 2019 |
€ million Assets 2018 (Restated)(a) |
€ million Liabilities 2019 |
€
million Liabilities 2018 (Restated)(a) |
€ million 2019 |
€ million Total 2018 (Restated)(a) |
||||||||||||||||||
Pensions and similar obligations | 402 | 334 | (130 | ) | 70 | 272 | 404 | |||||||||||||||||
Provisions and accruals | 495 | 578 | 261 | 243 | 756 | 821 | ||||||||||||||||||
Goodwill and intangible assets | 248 | 41 | (2,344 | ) | (1,952 | ) | (2,096 | ) | (1,911 | ) | ||||||||||||||
Accelerated tax depreciation | (67 | ) | (64 | ) | (618 | ) | (615 | ) | (685 | ) | (679 | ) | ||||||||||||
Tax losses | 153 | 126 | 31 | 4 | 184 | 130 | ||||||||||||||||||
Fair value gains | (14 | ) | 12 | (36 | ) | 143 | (50 | ) | 155 | |||||||||||||||
Fair value losses | - | 2 | 15 | 20 | 15 | 22 | ||||||||||||||||||
Share-based payments | 31 | 59 | 125 | 116 | 156 | 175 | ||||||||||||||||||
Other | 60 | 29 | 101 | 48 | 161 | 77 | ||||||||||||||||||
Lease liability | 170 | 245 | 149 | 183 | 319 | 428 | ||||||||||||||||||
Right of use asset | (142 | ) | (210 | ) | (127 | ) | (160 | ) | (269 | ) | (370 | ) | ||||||||||||
1,336 | 1,152 | (2,573 | ) | (1,900 | ) | (1,237 | ) | (748 | ) | |||||||||||||||
Of which deferred tax to be recovered/(settled) after more than 12 months |
1,030 | 856 | (2,681 | ) | (2,027 | ) | (1,651 | ) | (1,171 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
106 | Annual Report on Form 20-F 2019 |
Financial Statements |
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6C. Tax on items recognised in equity or other comprehensive income
Income tax is recognised in equity or other comprehensive income for items recognised directly in equity or other comprehensive income.
|
Tax effects directly recognised in equity or other comprehensive income were as follows:
Movements in 2019 and 2018 |
€ million Before tax 2019
|
€ million Tax (charge)/ credit 2019
|
€ million tax 2019
|
€ million tax 2018 |
€ million Tax (charge)/ credit 2018 |
€ million After tax 2018 |
||||||||||||||||||
Gains/(losses) on: | ||||||||||||||||||||||||
Equity instruments at fair value through other comprehensive income |
35 | (6 | ) | 29 | 51 | – | 51 | |||||||||||||||||
Cash flow hedges |
198 | (22 | ) | 176 | (70 | ) | 15 | (55 | ) | |||||||||||||||
Remeasurements of defined benefit pension plans | 381 | (28 | ) | 353 | (437 | ) | 109 | (328 | ) | |||||||||||||||
Currency retranslation gains/(losses)(a) | 6 | (21 | ) | (15 | ) | (847 | ) | 8 | (839 | ) | ||||||||||||||
620 | (77 | ) | 543 | (1,303 | ) | 132 | (1,171 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
7. Combined earnings per share
The combined earnings per share calculations are based on the average number of share units representing the combined ordinary shares of NV and PLC in issue during the period, less the average number of shares held as treasury shares.
In calculating diluted earnings per share and underlying earnings per share, a number of adjustments are made to the number of shares, principally, the exercise of share options by employees.
Underlying earnings per share 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 in operating profit and any other significant unusual items within net profit but not operating profit.
|
Earnings per share for total operations for the 12 months were as follows:
€ 2019 |
€ 2018 (Restated)(a) |
€ 2017 (Restated)(a) |
||||||||||||||
Basic earnings per share | 2.15 | 3.49 | 2.15 | |||||||||||||
Diluted earnings per share | 2.14 | 3.48 | 2.14 | |||||||||||||
Underlying earnings per share |
2.55 | 2.35 | 2.23 | |||||||||||||
Millions of share units | ||||||||||||||||
Calculation of average number of share units | 2019 | 2018 | 2017 | |||||||||||||
Average number of shares: NV | 1,598.0 | 1,714.7 | 1,714.7 | |||||||||||||
PLC |
1,175.5 | 1,264.0 | 1,310.2 | |||||||||||||
Less treasury shares held by employee share trusts and companies | (157.0 | ) | (295.4 | ) | (223.3 | ) | ||||||||||
Combined average number of share units – used for basic earnings per share | 2,616.5 | 2,683.3 | 2,801.6 | |||||||||||||
Add dilutive effect of share-based compensation plans | 10.2 | 11.5 | 12.4 | |||||||||||||
Diluted combined average number of share units – used for diluted and underlying earnings per share |
2,626.7 | 2,694.8 | 2,814.0 | |||||||||||||
Calculation of earnings | Notes | € million 2019 |
€ million 2018 (Restated)(a) |
€ million 2017 (Restated)(a) |
||||||||||||
Net profit | 6,026 | 9,788 | 6,456 | |||||||||||||
Non-controlling interests | (401 | ) | (419 | ) | (433 | ) | ||||||||||
Net profit attributable to shareholders’ equity – used for basic and diluted earnings per share | 5,625 | 9,369 | 6,023 | |||||||||||||
Post tax impact of non-underlying items | 3 | 1,063 | (3,024 | ) | 262 | |||||||||||
Underlying profit attributable to shareholders’ equity – used for underlying earnings per share |
6,688 | 6,345 | 6,285 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Annual Report on Form 20-F 2019 | 107 |
Notes to the Consolidated Financial Statements
Unilever Group continued
8. Dividends on ordinary capital
Dividends are recognised on the date that the shareholder’s right to receive payment is established. This is generally the date when the dividend is declared.
|
Dividends on ordinary capital during the year | € million 2019 |
€ million 2018 |
€ million 2017 |
|||||||||
NV dividends | (2,352 | ) | (2,262 | ) | (2,154 | ) | ||||||
PLC dividends | (1,871 | ) | (1,819 | ) | (1,762 | ) | ||||||
(4,223 | ) | (4,081 | ) | (3,916 | ) |
Four quarterly interim dividends were declared and paid during 2019 totalling €1.62 (2018: €1.52) per NV ordinary share and £1.42 (2018: £1.33) per PLC ordinary share.
A final quarterly dividend of €1,073 million (2018: €1,003 million) was declared on 30 January 2020, to be paid in March 2020; €0.41 per NV ordinary share (2018: €0.39) and £0.35 per PLC ordinary share (2018: £0.34). Total dividends declared in relation to 2019 were €1.64 (2018: €1.55) per NV ordinary share and £1.43 (2018: £1.35) per PLC ordinary share.
9. Goodwill and intangible assets
Goodwill
Goodwill is initially recognised based on the accounting policy for business combinations (see note 21). Goodwill is subsequently measured at cost less amounts provided for impairment.
Goodwill acquired in a business combination is assessed to determine whether new cash generating units are created, and if not, is allocated to the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination. These might not always be the same as the CGUs that include the assets and liabilities of the acquired business. Each unit or group of units to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is not larger than an operating segment.
In 2019, the existing nine cash generating units (CGUs) based on the three geographical areas and three divisions are supplemented by a new health and well being CGU which is made up of recently acquired OLLY Nutrition business.
Intangible assets
Separately purchased intangible assets are initially measured at cost, being the purchase price as at the date of acquisition. On acquisition of new interests in group companies, Unilever recognises any specifically identifiable intangible assets separately from goodwill. These intangible assets are initially measured at fair value as at the date of acquisition.
Expenditure to support development of internally-produced intangible assets is recognised in profit or loss as incurred.
Indefinite-life intangibles mainly comprise trademarks and brands, for which there is no foreseeable limit to the period over which they are expected to generate net cash inflows. These are considered to have an indefinite life, given the strength and durability of our brands and the level of marketing support. These assets are not amortised but are subject to a review for impairment annually, or more frequently if events or circumstances indicate this is necessary. Any impairment is charged to the income statement as it arises.
Finite-life intangible assets mainly comprise software, patented and non-patented technology, know-how and customer lists. These assets are amortised on a straight-line basis in the income statement over the period of their expected useful lives, or the period of legal rights if shorter. None of the amortisation periods exceeds ten years.
|
108 | Annual Report on Form 20-F 2019 |
Financial Statements |
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9. Goodwill and intangible assets continued
€ million | € million | € million | € million | € million | ||||||||||||||||
Indefinite-life | Finite-life intangible assets | |||||||||||||||||||
Movements during 2019 | Goodwill | intangible assets |
Software | Other | Total | |||||||||||||||
Cost | ||||||||||||||||||||
1 January 2019 | 18,502 | 11,247 | 2,689 | 1,103 | 33,541 | |||||||||||||||
Additions through business combinations | 444 | 726 | – | 50 | 1,220 | |||||||||||||||
Disposal of businesses | (2 | ) | (1 | ) | – | (5 | ) | (8 | ) | |||||||||||
Reclassification to held for sale | (2 | ) | – | – | – | (2 | ) | |||||||||||||
Additions | – | – | 205 | 3 | 208 | |||||||||||||||
Disposals | – | – | (11 | ) | (2 | ) | (13 | ) | ||||||||||||
Currency retranslation | 313 | 150 | 108 | 12 | 583 | |||||||||||||||
Hyperinflationary adjustment | (9 | ) | (1 | ) | – | – | (10 | ) | ||||||||||||
31 December 2019 | 19,246 | 12,121 | 2,991 | 1,161 | 35,519 | |||||||||||||||
Accumulated amortisation and impairment | ||||||||||||||||||||
1 January 2019 | (1,161 | ) | (212 | ) | (1,927 | ) | (748 | ) | (4,048 | ) | ||||||||||
Amortisation/impairment for the year | (18 | ) | – | (296 | ) | (56 | ) | (370 | ) | |||||||||||
Disposals of group companies | – | – | – | 5 | 5 | |||||||||||||||
Disposals | – | – | 5 | 1 | 6 | |||||||||||||||
Currency retranslation | – | – | (74 | ) | (9 | ) | (83 | ) | ||||||||||||
31 December 2019 | (1,179 | ) | (212 | ) | (2,292 | ) | (807 | ) | (4,490 | ) | ||||||||||
Net book value 31 December 2019(b) | 18,067 | 11,909 | 699 | 354 | 31,029 | |||||||||||||||
€ million | € million | € million | € million | € million | ||||||||||||||||
Indefinite-life | Finite-life intangible assets | |||||||||||||||||||
Movements during 2018 | Goodwill | intangible assets |
Software | Other | Total | |||||||||||||||
Cost | ||||||||||||||||||||
1 January 2018 | 18,042 | 10,275 | 2,499 | 1,090 | 31,906 | |||||||||||||||
Hyperinflation restatement to 1 January 2018 | 244 | 25 | 3 | – | 272 | |||||||||||||||
Additions through business combinations | 470 | 825 | – | 12 | 1,307 | |||||||||||||||
Disposal of businesses | (1 | ) | (1 | ) | – | – | (2 | ) | ||||||||||||
Reclassification to held for sale(a) | (227 | ) | (55 | ) | (1 | ) | – | (283 | ) | |||||||||||
Reclassification from held for sale | – | 9 | – | – | 9 | |||||||||||||||
Additions | – | – | 201 | 2 | 203 | |||||||||||||||
Disposals | – | – | – | (15 | ) | (15 | ) | |||||||||||||
Currency retranslation | (151 | ) | 156 | (15 | ) | 14 | 4 | |||||||||||||
Hyperinflationary adjustment | 125 | 13 | 2 | – | 140 | |||||||||||||||
31 December 2018 | 18,502 | 11,247 | 2,689 | 1,103 | 33,541 | |||||||||||||||
Accumulated amortisation and impairment | ||||||||||||||||||||
1 January 2018 | (1,161 | ) | (14 | ) | (1,637 | ) | (693 | ) | (3,505 | ) | ||||||||||
Hyperinflation restatement to 1 January 2018 | – | – | (3 | ) | – | (3 | ) | |||||||||||||
Amortisation/impairment for the year | – | (198 | ) | (297 | ) | (61 | ) | (556 | ) | |||||||||||
Disposals | – | – | – | 14 | 14 | |||||||||||||||
Currency retranslation | – | – | 12 | (8 | ) | 4 | ||||||||||||||
Hyperinflationary adjustment | – | – | (2 | ) | – | (2 | ) | |||||||||||||
31 December 2018 | (1,161 | ) | (212 | ) | (1,927 | ) | (748 | ) | (4,048 | ) | ||||||||||
Net book value 31 December 2018(b) |
17,341 | 11,035 | 762 | 355 | 29,493 |
(a) | In 2018, Goodwill and intangibles amounting to €283 million was reclassified as held for sale in relation to the Spreads and Alsa baking and dessert businesses. |
(b) | Within the indefinite-life intangible assets there are three brands that have a significant carrying value: Knorr €1,816 million (2018: €1,789 million), Carver Korea €1,509 million (2018: €1,534 million) and Hellmann’s €1,220 million (2018: €1,195 million). |
Impairment
We have tested goodwill and indefinite-life intangible assets for impairment. No impairment was identified, except for goodwill relating to a local business classified to held for sale. A €18 million charge has been recognised in non-underlying items within the line ‘impairments’ (See note 3 on page 96).
Annual Report on Form 20-F 2019 | 109 |
Notes to the Consolidated Financial Statements
Unilever Group continued
9. Goodwill and intangible assets continued
Significant CGUs
The goodwill and indefinite-life intangible assets held in the CGUs relating to Foods & Refreshment Europe, Foods & Refreshment The Americas, Beauty & Personal Care The Americas and Beauty & Personal Care Asia/AMET/RUB are considered significant within the total carrying amounts of goodwill and indefinite-life intangible assets at 31 December 2019 in terms of size, headroom and sensitivity to assumptions used.
2019 CGUs | 2018 CGUs | |||||||||||||||
€ billion
Goodwill |
€ billion Indefinite-life intangible assets |
€ billion
Goodwill |
€
billion Indefinite-life intangible assets |
|||||||||||||
Foods & Refreshment Europe | 4.1 | 1.7 | 3.9 | 1.6 | ||||||||||||
Foods & Refreshment The Americas | 4.0 | 2.1 | 3.9 | 2.1 | ||||||||||||
Beauty & Personal Care The Americas | 4.3 | 3.1 | 4.0 | 2.8 | ||||||||||||
Beauty & Personal Care Asia/AMET/RUB | 1.7 | 2.0 | 1.7 | 2.0 | ||||||||||||
Total significant CGUs | 14.1 | 8.9 | 13.5 | 8.5 | ||||||||||||
Others(a) | 4.0 | 3.0 | 3.8 | 2.5 | ||||||||||||
Total CGUs |
18.1 | 11.9 | 17.3 | 11.0 | ||||||||||||
(a) Included within others are goodwill and intangible assets that are allocated to multiple cash generating units which are insignificant.
The growth rates and margins for the significant CGUs are as below: |
| |||||||||||||||
For the year 2019 |
Foods & Refreshment Europe |
Foods & Refreshment The Americas |
Beauty & Personal Care The Americas |
Beauty & Personal Care Asia/AMET/RUB |
||||||||||||
Longer-term sustainable growth rates | 1.1% | 1.7% | 1.7% | 3.9% | ||||||||||||
Average near-term nominal growth rates | 1.2% | (1.2)% | 1.6% | 5.3% | ||||||||||||
Average operating margins | 16% | 15% | 21% | 22% | ||||||||||||
For the year 2018 | Foods & Refreshment Europe |
Foods & Refreshment The Americas |
Beauty & Personal Care The Americas |
Beauty & Personal Care Asia/AMET/RUB |
||||||||||||
Longer-term sustainable growth rates | 1.2% | 1.6% | 1.6% | 3.8% | ||||||||||||
Average near-term nominal growth rates | 0.0% | 0.7% | 2.8% | 3.9% | ||||||||||||
Average operating margins |
16% | 15% | 20% | 22% |
Key assumptions
The key assumptions used in our impairment testing are as follows:
• | Value in use has been calculated as the present value of projected cash flows. |
• | The projections cover a period of five years, as we believe this to be the most appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cash flows. |
• | The growth rates and margins used to estimate future performance are based on the conservative end of the range of estimates from past performance, our annual forecast and three year strategic plan extended to year four and five. |
• | The long-term sustainable growth rates are determined as the lower of our three-year average market growth projection and World Bank’s three-year average GDP growth forecast for our markets. |
• | A pre-tax discount rate of 7.4% (2018: 7.4%) was used. The discount rate was based on the weighted average cost of capital of the Group, adjusted with a risk-premium. |
We have performed sensitivity analyses around the base assumptions. There are no reasonably possible changes in a key assumption that would cause the carrying amount to exceed the recoverable amount.
110 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
10. Property, plant and equipment
The Group’s property, plant and equipment is comprised of owned assets (note 10A) and leased assets (note 10B). Property, plant and equipment is measured at cost including eligible borrowing costs less depreciation and accumulated impairment losses. | ||||
Property, plant and equipment is subject to review for impairment if triggering events or circumstances indicate that this is necessary. If an indication of impairment exists, the asset’s or cash generating unit’s recoverable amount is estimated and any impairment loss is charged to the income statement as it arises. | ||||
Owned assets | ||||
Owned assets are initially measured at historical cost. Depreciation is provided on a straight-line basis over the expected average useful lives of the assets. Residual values are reviewed at least annually. Estimated useful lives by major class of assets are as follows: | ||||
• |
Freehold buildings (no depreciation on freehold land) | 40 years | ||
• |
Leasehold land and buildings | 40 years (or life of lease if less) | ||
• |
Plant and equipment | 2–20 years | ||
Leased assets |
||||
The cost of a leased asset is measured as the lease liability at inception of the lease contract and other direct costs less any incentives granted by the lessor. The Group has not capitalised leases which are less than 12 months or leases of low value assets. These mainly relate to IT equipment, office equipment, furniture and fitting and other peripheral items. When a lease liability is remeasured, the related lease asset is adjusted by the same amount. | ||||
Depreciation is provided on a straight-line basis from the commencement date of the lease to the end of the lease term. |
Property, plant and equipment |
€ million 2019 |
€ million 2018 |
||||||||||
Owned assets |
10A | 10,249 | 10,214 | |||||||||
Leased assets |
10B | 1,813 | 1,874 | |||||||||
Total |
12,062 | 12,088 |
10A. Owned assets
Movements during 2019 |
€ million Land and buildings |
€ million Plant and equipment |
€ million Total |
|||||||||
Cost |
||||||||||||
1 January 2019 |
4,386 | 15,216 | 19,602 | |||||||||
Additions through business combinations |
7 | 28 | 35 | |||||||||
Additions |
175 | 1,141 | 1,316 | |||||||||
Disposals |
(72 | ) | (649 | ) | (721 | ) | ||||||
Hyperinflationary adjustment |
(3 | ) | (28 | ) | (31 | ) | ||||||
Reclassification as held for sale |
(63 | ) | (116 | ) | (179 | ) | ||||||
Currency retranslation |
68 | 252 | 320 | |||||||||
31 December 2019 |
4,498 | 15,844 | 20,342 | |||||||||
Accumulated depreciation |
||||||||||||
1 January 2019 |
(1,390 | ) | (7,998 | ) | (9,388 | ) | ||||||
Depreciation charge for the year |
(134 | ) | (1,022 | ) | (1,156 | ) | ||||||
Disposals |
28 | 456 | 484 | |||||||||
Hyperinflationary adjustment |
5 | 30 | 35 | |||||||||
Reclassification as held for sale |
38 | 81 | 119 | |||||||||
Currency retranslation |
(26 | ) | (161 | ) | (187 | ) | ||||||
31 December 2019 |
(1,479 | ) | (8,614 | ) | (10,093 | ) | ||||||
Net book value 31 December 2019(a) |
3,019 | 7,230 | 10,249 | |||||||||
Includes capital expenditures for assets under construction |
78 | 872 | 950 |
The Group has commitments to purchase property, plant and equipment of €264 million (2018: €324 million).
Annual Report on Form 20-F 2019 | 111 |
Notes to the Consolidated Financial Statements
Unilever Group continued
10. Property, plant and equipment continued
10A. Owned assets continued
Movements during 2018 (Restated)(b) |
€ million Land and buildings |
€ million Plant and equipment |
€ million Total |
|||||||||
Cost |
||||||||||||
1 January 2018 |
4,256 | 14,811 | 19,067 | |||||||||
Hyperinflation restatement to 1 January 2018 |
37 | 182 | 219 | |||||||||
Additions through business combinations |
11 | 31 | 42 | |||||||||
Additions |
236 | 1,087 | 1,323 | |||||||||
Disposals |
(97 | ) | (585 | ) | (682 | ) | ||||||
Hyperinflationary adjustment |
49 | 93 | 142 | |||||||||
Reclassification as held for sale |
(17 | ) | (54 | ) | (71 | ) | ||||||
Currency retranslation |
(89 | ) | (349 | ) | (438 | ) | ||||||
31 December 2018 |
4,386 | 15,216 | 19,602 | |||||||||
Accumulated depreciation |
||||||||||||
1 January 2018 |
(1,345 | ) | (7,450 | ) | (8,795 | ) | ||||||
Hyperinflation restatement to 1 January 2018 |
(10 | ) | (106 | ) | (116 | ) | ||||||
Depreciation charge for the year |
(115 | ) | (1,062 | ) | (1,177 | ) | ||||||
Disposals |
63 | 514 | 577 | |||||||||
Hyperinflationary adjustment |
(7 | ) | (53 | ) | (60 | ) | ||||||
Reclassification as held for sale |
10 | 33 | 43 | |||||||||
Currency retranslation |
14 | 126 | 140 | |||||||||
31 December 2018 |
(1,390 | ) | (7,998 | ) | (9,388 | ) | ||||||
Net book value 31 December 2018(a) |
2,996 | 7,218 | 10,214 | |||||||||
Includes capital expenditures for assets under construction |
130 | 956 | 1,086 |
(a) | Includes €319 million (2018: €302 million) of freehold land. |
(b) | Restated following adoption of IFRS 16. Finance leases previously capitalised as property, plant, and equipment are now included within leased assets, refer to note 10B. |
10B. Leased assets
Movements during 2019 |
€ million Land and buildings |
€ million Plant and equipment |
€ million Total |
|||||||||
Cost |
||||||||||||
1 January 2019 |
2,770 | 816 | 3,586 | |||||||||
Additions |
278 | 174 | 452 | |||||||||
Disposals |
(240 | ) | (180 | ) | (420 | ) | ||||||
Hyperinflationary adjustment |
23 | – | 23 | |||||||||
Currency retranslation |
43 | 17 | 60 | |||||||||
31 December 2019 |
2,874 | 827 | 3,701 | |||||||||
Accumulated depreciation |
||||||||||||
1 January 2019 |
(1,241 | ) | (471 | ) | (1,712 | ) | ||||||
Depreciation charge for the year |
(297 | ) | (159 | ) | (456 | ) | ||||||
Disposals |
154 | 150 | 304 | |||||||||
Hyperinflationary adjustment |
9 | – | 9 | |||||||||
Currency retranslation |
(22 | ) | (11 | ) | (33 | ) | ||||||
31 December 2019 |
(1,397 | ) | (491 | ) | (1,888 | ) | ||||||
Net book value 31 December 2019 |
1,477 | 336 | 1,813 |
Movements during 2018 (Restated)(a) | € million Land and buildings |
€ million Plant and equipment |
€ million Total |
|||||||||
Cost |
||||||||||||
1 January 2018 |
2,880 | 799 | 3,679 | |||||||||
Additions |
250 | 171 | 421 | |||||||||
Disposals |
(310 | ) | (141 | ) | (451 | ) | ||||||
Currency retranslation |
(50 | ) | (13 | ) | (63 | ) | ||||||
31 December 2018 |
2,770 | 816 | 3,586 | |||||||||
Accumulated depreciation |
||||||||||||
1 January 2018 |
(1,275 | ) | (407 | ) | (1,682 | ) | ||||||
Depreciation charge for the year |
(300 | ) | (183 | ) | (483 | ) | ||||||
Disposals |
307 | 114 | 421 | |||||||||
Currency retranslation |
27 | 5 | 32 | |||||||||
31 December 2018 |
(1,241 | ) | (471 | ) | (1,712 | ) | ||||||
Net book value 31 December 2018 |
1,529 | 345 | 1,874 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Our leases mainly comprise land and buildings and Plant and equipment. The Group leases land and buildings for manufacturing, warehouse facilities and office space and also sublease some of the properties under operating leases. The Group has leases for vehicles and equipment.
The Group has recognised in the income statement an expense of €97 million (2018: €95 million) for short term leases and €79 million (2018: €70 million) on leases for low-value assets.
During the year the Group recognised an income of €25 million (2018: €22 million) in respect of sublet properties
Cash flows: The total cash outflows for leases was €534 million (2018: €575 million).
Lease liabilities: Lease liabilities are shown in note 15 on pages 116 and 119.
112 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
11. Other non-current assets
Joint ventures are undertakings in which the Group has an interest and which are jointly controlled by the Group and one or more other parties. Associates are undertakings where the Group has an investment in which it does not have control or joint control but can exercise significant influence.
Interests in joint ventures and associates are accounted for using the equity method and are stated in the consolidated balance sheet at cost, adjusted for the movement in the Group’s share of their net assets and liabilities. The Group’s share of the profit or loss after tax of joint ventures and associates is included in the Group’s consolidated profit before taxation.
Where the Group’s share of losses exceeds its interest in the equity accounted investee, the carrying amount of the investment is reduced to zero and the recognition of further losses is discontinued, except to the extent that the Group has an obligation to make payments on behalf of the investee.
Biological assets are measured at fair value less costs to sell with any changes recognised in the income statement.
|
€ million 2019
|
€ million 2018 Restated(a) |
|||||||
Interest in net assets of joint ventures |
35 | 14 | ||||||
Interest in net assets of associates |
37 | 40 | ||||||
Long-term trade and other receivables(b) |
380 | 307 | ||||||
Fair value of biological assets |
17 | 18 | ||||||
Other non-current assets(c) |
184 | 151 | ||||||
653 | 530 |
(a) | Restated following adoption of IFRS 16. Operating lease prepayments for land that were previously reported within other non-current assets, have now been included within leased assets. See note 1 and note 24 for further details. |
(b) | Mainly relates to indirect tax receivables where we do not have the contractual right to receive payment within 12 months. |
(c) | Mainly relates to tax assets. |
Movements during 2019 and 2018 | |
€ million 2019 |
|
|
€ million 2018 |
| ||
Joint ventures(a) |
||||||||
1 January |
14 | 32 | ||||||
Additions |
– | 5 | ||||||
Dividends received/reductions(b) |
(158 | ) | (216 | ) | ||||
Share of net profit/(loss) |
179 | 190 | ||||||
Currency retranslation |
– | 3 | ||||||
31 December |
35 | 14 | ||||||
Associates(c) |
||||||||
1 January |
40 | 44 | ||||||
Additions |
1 | 3 | ||||||
Dividend received/reductions |
– | – | ||||||
Share of net profit/(loss) |
(3 | ) | (5 | ) | ||||
Currency retranslation |
(1 | ) | (2 | ) | ||||
31 December |
37 | 40 |
(a) | Our principal joint ventures are Unilever FIMA LDA for Portugal, the Pepsi/Lipton Partnership for the US and Pepsi Lipton International for the rest of the world. |
(b) | 2018 includes a capital reduction in joint venture of Unilever FIMA LDA of €64 million. |
(c) | Associates as at 31 December 2019 primarily comprise our investments in Langholm Capital Partners. |
The joint ventures and associates have no contingent liabilities to which the Group is exposed, and the Group has no contingent liabilities in relation to its interests in the joint ventures and associates. The Group has no outstanding capital commitments to joint ventures. Outstanding balances with joint ventures and associates are shown in note 23 on page 137.
12. Inventories
Inventories are valued at the lower of weighted average cost and net realisable value. Cost comprises direct costs and, where appropriate, a proportion of attributable production overheads. Net realisable value is the estimated selling price less the estimated costs necessary to make the sale. |
Inventories | |
€ million 2019 |
|
|
€ million 2018 |
| ||
Raw materials and consumables |
1,399 | 1,454 | ||||||
Finished goods and goods for resale |
3,053 | 3,052 | ||||||
Total inventories |
4,452 | 4,506 | ||||||
Provision for inventories |
(288 | ) | (205 | ) | ||||
4,164 | 4,301 |
Annual Report on Form 20-F 2019 | 113 |
Notes to the Consolidated Financial Statements
Unilever Group continued
12. Inventories continued
Provisions for inventories | |
€ million 2019 |
|
|
€ million 2018 |
| ||
1 January |
205 | 194 | ||||||
Charge to income statement |
153 | 92 | ||||||
Reduction/releases |
(71 | ) | (72 | ) | ||||
Currency translations |
– | (7 | ) | |||||
Others(a) |
1 | (2 | ) | |||||
31 December |
288 | 205 |
(a) | Others mainly include the amount towards the acquisition/ disposal of business and transfers. |
Inventories with a value of €159 million (2018: €124 million) are carried at net realisable value, this being lower than cost. During 2019 a total expense of €363 million (2018: €227 million) was recognised in the income statement for inventory write downs and losses.
13. Trade and other current receivables
Trade and other current receivables are initially recognised at fair value plus any directly attributable transaction costs. Subsequently these assets are held at amortised cost, using the effective interest method and net of any impairment losses. Discounts payable to customers are shown as a reduction in trade receivables when there is a legal right and intent to settle them on a net basis. |
We do not consider the fair values of trade and other current receivables to be significantly different from their carrying values. Concentrations of credit risk with respect to trade receivables are limited, due to the Group’s customer base being large and diverse. Our historical experience of collecting receivables, supported by the level of default, is that credit risk is low across territories and so trade receivables are considered to be a single class of financial assets. Impairment for trade receivables are calculated for specific receivables with known or anticipated issues affecting the likelihood of recovery and for balances past due with a probability of default based on historical data as well as relevant forward-looking information.
Trade and other current receivables |
|
€ million 2019
|
|
|
€ million 2018 Restated(a) |
| ||
Due within one year |
||||||||
Trade receivables(b) |
4,916 | 4,350 | ||||||
Prepayments and accrued income |
579 | 690 | ||||||
Other receivables |
1,200 | 1,442 | ||||||
6,695 | 6,482 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | 2019 includes €698 million (2018: €677 million) due from KKR as a result of an arrangement following the sale of the global spreads business (excluding Southern Africa). Unilever will provide services to KKR including IT infrastructure, bookkeeping, payroll, marketing and co-packing for up to two years from completion of the disposal and KKR pays Unilever for materials sourced on its behalf. See also trade payables on page 115. |
Included within trade receivables are discounts due to our customers of €2,423 million (2018: €3,062 million). The increase from 2018 is primarily driven by differences in the timing of promotional activities and the settlement of customer invoices compared to last year. Other receivables comprise financial assets of €208 million (2018: €299 million), and non-financial assets of €992 million (2018: €1,142 million). Financial assets include supplier and customer deposits, employee advances and certain derivatives. Non-financial assets mainly consist of reclaimable sales tax of €584 million (2018: €690 million)
Ageing of trade receivables | |
€ million 2019 |
|
|
€ million 2018 |
| ||
Not overdue |
3,856 | 3,440 | ||||||
Past due less than three months |
827 | 747 | ||||||
Past due more than three months but less than six months |
186 | 132 | ||||||
Past due more than six months but less than one year |
94 | 74 | ||||||
Past due more than one year |
164 | 145 | ||||||
Total trade receivables |
5,127 | 4,538 | ||||||
Impairment provision for trade receivables |
(211 | ) | (188 | ) | ||||
4,916 | 4,350 |
The total impairment provision includes €211 million (2018: €188 million) for current trade receivables, €26 million (2018: €13 million) for other current receivables and €84 million (2018: €13 million) for non-current trade and other receivables.
Impairment provision for total trade and other receivables | |
€ million 2019 |
|
|
€ million 2018 |
| ||
1 January |
214 | 184 | ||||||
Charge to income statement |
79 | 65 | ||||||
Reduction/releases |
(54 | ) | (29 | ) | ||||
Reclassifications(a) |
86 | – | ||||||
Currency translations |
(4 | ) | (6 | ) | ||||
31 December |
321 | 214 |
(a) | Includes an amount transferred from provisions relating to Brazil indirect taxes. See note 19. |
114 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
14. Trade payables and other liabilities
Trade payables
Trade payables are initially recognised at fair value less any directly attributable transaction costs. Trade payables are subsequently measured at amortised cost, using the effective interest method.
Other liabilities
Other liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent measurement depends on the type of liability: • Accruals are subsequently measured at amortised cost, using the effective interest method. • Social security and sundry taxes are subsequently measured at amortised cost, using the effective interest method. • Deferred consideration is subsequently measured at fair value with changes in the income statement as explained below. • Others are subsequently measured either at amortised cost, using the effective interest method or at fair value, with changes being recognised in the income statement.
Deferred Consideration
Deferred consideration represents any payments to the sellers of a business that occur after the acquisition date. These typically comprise contingent consideration and fixed deferred consideration: • Fixed deferred consideration is a payment with a due date after acquisition that is not dependent on future conditions. • Contingent consideration is a payment which is dependent on certain conditions being met in the future and is often variable.
All deferred consideration is initially recognised at fair value as at the acquisition date, which includes a present value discount. Subsequently, deferred consideration is measured to reflect the unwinding of discount on the liability, with changes recognised in finance cost within the income statement. In the balance sheet it is remeasured to reflect the latest estimate of the achievement of the conditions on which the consideration is based; changes in value other than the discount unwind are recognised as acquisition and disposal-related costs within non-underlying items in the income statement. |
We do not consider the fair values of trade payables and other liabilities to be significantly different from their carrying values.
Trade payables and other liabilities | |
€ million 2019 |
|
|
€ million 2018 |
| ||
Current: due within one year |
||||||||
Trade payables(a) |
9,190 | 9,121 | ||||||
Accruals |
4,153 | 3,724 | ||||||
Social security and sundry taxes |
507 | 498 | ||||||
Deferred consideration |
39 | 14 | ||||||
Others |
879 | 1,100 | ||||||
14,768 | 14,457 | |||||||
Non-current: due after more than one year |
||||||||
Accruals |
117 | 121 | ||||||
Deferred consideration |
169 | 173 | ||||||
Others |
53 | 52 | ||||||
339 | 346 | |||||||
Total trade payables and other liabilities |
15,107 | 14,803 |
(a) | 2019 includes €359 million (2018: €311 million) due to KKR as a result of an arrangement following the sale of the global spreads business (excluding Southern Africa). Unilever will provide certain services for up to two years from completion of the disposal and pays KKR for amounts collected on its behalf. See also trade receivables on page 114. |
Included within trade payables and other liabilities are discounts due to our customers of €1,053 million (2018: €514 million). The increase from 2018 is primarily driven by differences in the timing of promotional activities and the settlement of customer invoices compared to last year.
Included within others are IT and consulting services.
Deferred Consideration
At 31 December 2019 the total balance of deferred consideration for acquisition is €208 million (2018: €187 million), which includes contingent consideration of €154 million (2018: €142 million). These contingent consideration payments are dependent on acquired businesses achieving contractually agreed financial targets (mainly relates to cumulative increases in turnover and profit before tax) and fall due up until 2024, with a maximum contractual amount of €1,140 million.
Supplier financing arrangements for trade payables
Some of our suppliers elect to factor some of their receivables from the Group with financial institutions. In some instances we provide suppliers and/or banks with visibility of invoices approved for payment, which helps them receive cash from the bank before the invoice due date, if they choose to do so. Payment dates and terms for Unilever do not vary based on whether the supplier chooses to factor their receivable. If a receivable is purchased by a third party bank, that third party bank does not benefit from additional security when compared to the security originally enjoyed by the supplier. The Group evaluates these arrangements to assess if the payable holds the characteristics of a trade payable or should be classified as a financial liability. At 31 December 2019 and 31 December 2018 all such liabilities were classified as trade payables.
Annual Report on Form 20-F 2019 | 115 |
Notes to the Consolidated Financial Statements
Unilever Group continued
15. Capital and funding
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Internal holdings
The ordinary shares numbered 1 to 2,400 (inclusive) in NV (‘Special Shares’) and deferred stock of PLC are held as to one half of each class by N.V. Elma – a subsidiary of NV – and one half by United Holdings Limited – a subsidiary of PLC. This capital is eliminated on consolidation.
Share-based compensation
The Group operates a number of share-based compensation plans involving options and awards of ordinary shares of NV and PLC. Full details of these plans are given in note 4C on pages 103 to 104.
Other reserves
Other reserves include the fair value reserve, the foreign currency translation reserve, the capital redemption reserve and treasury shares.
Shares held by employee share trusts and group companies
Certain PLC trusts, NV and group companies purchase and hold NV and PLC shares to satisfy performance shares granted, share options granted and other share awards (see note 4C). The assets and liabilities of these trusts and shares held by group companies are included in the consolidated financial statements. The book value of shares held is deducted from other reserves, and trusts’ borrowings are included in the Group’s liabilities. The costs of the trusts are included in the results of the Group. These shares are excluded from the calculation of earnings per share.
Financial liabilities
Financial liabilities are initially recognised at fair value, less any directly related transaction costs. When bonds are designated as being part of a fair value hedge relationship in those cases bonds are carried at amortised cost, adjusted for the fair value of the risk being hedged, with changes in value shown in profit and loss. Other financial liabilities, excluding derivatives, are subsequently carried at amortised cost, with the exception of: • financial liabilities which the Group has elected to measure at fair value through profit or loss; • derivative financial liabilities – see note 16 on page 121; and • contingent consideration recognised by an acquirer in a business combination to which IFRS 3 applies. Such contingent consideration is subsequently measured at fair value through profit or loss.
Lease liabilities
Lease liabilities are initially measured at the present value of the lease payments that are not yet paid at the start of the lease term. This is discounted using an appropriate borrowing rate determined by the Group, where none is readily available in the lease contract.
The lease liability is subsequently reduced by cash payments and increased by interest costs. The lease liability is remeasured when the Group assesses that there will be a change in the amount expected to be paid during the lease term. |
The Group’s Treasury activities are designed to:
• | maintain a competitive balance sheet in line with at least A/A2 rating (see below); |
• | secure funding at lowest costs for the Group’s operations, M&A activity and external dividend payments (see below); |
• | protect the Group’s financial results and position from financial risks (see note 16); |
• | maintain market risks within acceptable parameters, while optimising returns (see note 16); and |
• | protect the Group’s financial investments, while maximising returns (see note 17) |
The Treasury department provides central deposit taking, funding and foreign exchange management services for the Group’s operations. The department is governed by standards and processes which are approved by Unilever Leadership Executive (ULE). In addition to guidelines and exposure limits, a system of authorities and extensive independent reporting covers all major areas of activity. Performance is monitored closely by senior management. Reviews are undertaken periodically by corporate audit.
Key instruments used by the treasury department are:
• | short-term and long-term borrowings; |
• | cash and cash equivalents; and |
• | plain vanilla derivatives, including cross currency interest rate swaps and foreign exchange contracts. |
The Treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved by the Chief Financial Officer. The use of leveraged instruments is not permitted.
Unilever considers the following components of its balance sheet to be managed capital:
• | total equity – retained profit, other reserves, share capital, share premium, non-controlling interests (notes 15A and 15B); |
• | short-term debt – current financial liabilities (note 15C); and |
• | long-term debt – non-current financial liabilities (note 15C). |
The Group manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders through an appropriate balance of debt and equity. The capital structure of the Group is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets.
Our current long-term credit rating is A+/A1 and our short-term credit rating is A1/P1. We aim to maintain a competitive balance sheet which we consider to be the equivalent of a credit rating of at least A/A2 in the long term. This provides us with:
• | appropriate access to the debt and equity markets; |
• | sufficient flexibility for acquisitions; |
• | sufficient resilience against economic and financial uncertainty while ensuring ample liquidity; and |
• | optimal weighted average cost of capital, given the above constraints. |
Unilever monitors the qualitative and quantitative factors utilised by the rating agencies. This information is publicly available and is updated by the credit rating agencies on a regular basis.
116 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
15. Capital and funding continued
15A. Share capital
Authorised(a) 2019 |
Issued, called up and fully paid(b) 2019 |
Authorised(a) 2018 |
Issued, called up and fully paid(b) 2018 |
|||||||||||||
Unilever N.V. | € million | € million | € million | € million | ||||||||||||
NV ordinary shares of € 0.16 each |
480 | 274 | 480 | 274 | ||||||||||||
NV ordinary shares of € 428.57 each (shares numbered 1 to 2,400 – ‘Special Shares’) |
1 | 1 | 1 | 1 | ||||||||||||
Internal holdings eliminated on consolidation (€ 428.57 shares) |
– | (1 | ) | – | (1 | ) | ||||||||||
Cancellation of treasury shares(c) |
– | (41 | ) | – | – | |||||||||||
481 | 233 | 481 | 274 | |||||||||||||
Unilever PLC | £ million | £ million | ||||||||||||||
PLC ordinary shares of 31/9p each |
37.0 | 40.8 | ||||||||||||||
PLC deferred stock of £1 each |
0.1 | 0.1 | ||||||||||||||
Internal holding eliminated on consolidation (£1 stock) |
(0.1 | ) | (0.1 | ) | ||||||||||||
Cancellation of treasury shares(c) |
(0.6 | ) | (3.8 | ) | ||||||||||||
36.4 | 37.0 | |||||||||||||||
€ million | € million | |||||||||||||||
Euro equivalent in millions (at £1.00 = €5.143)(d) |
187 | 190 | ||||||||||||||
Unilever Group | € million | € million | ||||||||||||||
Ordinary share capital of NV |
233 | 274 | ||||||||||||||
Ordinary share capital of PLC |
187 | 190 | ||||||||||||||
420 | 464 |
(a) | At 31 December 2019 Unilever N.V. had 3,000,000,000 (2018: 3,000,000,000) authorised ordinary shares. The requirement for a UK company to have an authorised share capital was abolished by the UK Companies Act 2006. In May 2010 Unilever PLC shareholders approved new Articles of Association to reflect this. |
(b) | At 31 December 2019 the following quantities of shares were in issue: 1,460,714,804 of NV ordinary shares; 2,400 of NV Special Shares; 1,168,530,650 of PLC ordinary shares and 100,000 of PLC deferred stock. At 31 December 2018, 1,714,727,700 of NV ordinary shares; 2,400 of NV Special Shares; 1,187,191,284 of PLC ordinary shares and 100,000 of PLC deferred stock were in issue. |
(c) | At 31 December 2019 254,012,896 of NV ordinary shares and 18,660,634 (2018: 122,965,077) of PLC ordinary shares that were repurchased as part of the share buyback programme in 2018 and prior years, were cancelled. |
(d) | Conversion rate for PLC ordinary shares nominal value to euros is £1 = €5.143 (which is calculated by dividing the nominal value of NV ordinary shares by the nominal value of PLC ordinary shares). |
For information on the rights of shareholders of NV and PLC and the operation of the Equalisation Agreement, see the Corporate Governance report on pages 47 to 53.
A nominal dividend of 6% per annum is paid on the deferred stock of PLC.
15B. Equity
Basis of consolidation
Unilever is the majority shareholder of all material subsidiaries and has control in all cases. Information in relation to significant subsidiaries is provided on page 142.
Subsidiaries with significant non-controlling interests
Unilever has one subsidiary company which has a material non-controlling interest, Hindustan Unilever Limited (HUL). Summary financial information in relation to HUL is shown below.
HUL balance sheet as at 31 December |
€ million 2019
|
€ million 2018 Restated(a) |
||||||
Non-current assets |
1,030 | 964 | ||||||
Current assets |
1,438 | 1,333 | ||||||
Current liabilities |
(1,117 | ) | (1,156 | ) | ||||
Non-current liabilities |
(332 | ) | (251 | ) | ||||
HUL comprehensive income for the year ended 31 December | ||||||||
Turnover |
4,937 | 4,527 | ||||||
Profit after tax |
730 | 617 | ||||||
Total comprehensive income |
740 | 576 |
Annual Report on Form 20-F 2019 | 117 |
Notes to the Consolidated Financial Statements
Unilever Group continued
15B. Equity continued
HUL cash flow for the year ended 31 December |
€ million 2019
|
€ million 2018 Restated(a) |
||||||
Net increase/(decrease) in cash and cash-equivalents |
145 | 14 | ||||||
HUL non-controlling interest | ||||||||
1 January |
(299 | ) | (288 | ) | ||||
Share of (profit)/loss for the year ended 31 December |
(239 | ) | (203 | ) | ||||
Other comprehensive income |
(6 | ) | (4 | ) | ||||
Dividend paid to the non-controlling interest |
218 | 183 | ||||||
Currency translation |
(2 | ) | 13 | |||||
31 December |
(328 | ) | (299 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Analysis of other reserves
€ million Total 2019
|
€ million Total 2018 (Restated)(a) |
€ million Total 2017 (Restated)(a) |
||||||||||
Fair value reserves |
7 | (194 | ) | (189 | ) | |||||||
Equity instruments |
123 | 98 | – | |||||||||
Cash flow hedges |
(116 | ) | (292 | ) | (236 | ) | ||||||
Available-for-sale financial assets |
– | – | 47 | |||||||||
Currency retranslation of group companies – see following table |
(4,712 | ) | (4,694 | ) | (3,879 | ) | ||||||
Adjustment on translation of PLC’s ordinary capital at 31/9p = €0.16 |
(148 | ) | (150 | ) | (164 | ) | ||||||
Capital redemption reserve |
37 | 32 | 32 | |||||||||
Book value of treasury shares – see following table |
(703 | ) | (10,181 | ) | (9,208 | ) | ||||||
Hedging gains/(losses) transferred to non-financial assets |
103 | 71 | – | |||||||||
Other(b) |
(158 | ) | (102 | ) | (179 | ) | ||||||
(5,574 | ) | (15,218 | ) | (13,587 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | Relates to option on purchase of subsidiary for non-controlling interest and hyperinflation adjustment arising on current year profit translated at closing exchange rate. |
Unilever acquired 2,678,000 (2018: 66,202,168) NV ordinary shares and 1,076,000 (2018: 65,458,433) PLC shares through purchases on the stock exchanges during the year. These shares are held as treasury stock as a separate component of other reserves. 254,012,896 of NV and 18,660,634 of PLC ordinary shares that were acquired as a part of the share buyback programme in 2018 and prior years, were cancelled during the year.
The total number of treasury shares held at 31 December 2019 was 8,027,879 (2018: 263,349,111) NV shares and 4,391,130 (2018: 24,334,848) PLC shares and these shares were held in connection with share-based compensation plans (see note 4C on pages 103 to 104).
Treasury shares – movements during the year | |
€ million 2019 |
|
|
€ million 2018 |
| ||
1 January |
(10,181 | ) | (9,208 | ) | ||||
Repurchase of shares |
– | (6,020 | ) | |||||
Cancellation of NV and PLC shares |
9,416 | 5,069 | ||||||
Other purchases and utilisations |
64 | (8 | ) | |||||
Adjustment on translation of PLC’s ordinary capital at 31/9p = €0.16 |
(2 | ) | (14 | ) | ||||
31 December |
(703 | ) | (10,181 | ) | ||||
Currency retranslation reserve – movements during the year |
€ million 2019
|
€ million 2018 (Restated)(a) |
||||||
1 January |
(4,694 | ) | (3,879 | ) | ||||
Currency retranslation of group companies net assets and liabilities during the year |
(341 | ) | (821 | ) | ||||
Movement in net investment hedges and exchange differences in net investments in foreign operations |
326 | 77 | ||||||
Recycled to income statement |
(3 | ) | (71 | ) | ||||
31 December |
(4,712 | ) | (4,694 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
118 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
15B. Equity continued
Statement of comprehensive income: other comprehensive income reconciliation
Fair value gains/(losses) on financial instruments – movement during the year | |
€ million 2019 |
|
|
€ million 2018 |
| ||
1 January |
(194 | ) | (189 | ) | ||||
Equity instruments |
25 | 51 | ||||||
Cash flow hedges |
176 | (56 | ) | |||||
31 December |
7 | (194 | ) | |||||
Refer to the consolidated statement of comprehensive income on page 87, the consolidated statement of changes in equity on page 88, and note 6C on page 107.
|
| |||||||
Remeasurement of defined benefit pension plans net of tax | |
€ million 2019 |
|
|
€ million 2018 |
| ||
1 January |
(1,499 | ) | (1,171 | ) | ||||
Movement during the year |
353 | (328 | ) | |||||
31 December |
(1,146 | ) | (1,499 | ) | ||||
Refer to the consolidated statement of comprehensive income on page 87, the consolidated statement of changes in equity on page 88, note 4B from page 98 to 103 and note 6C on page 107.
|
| |||||||
Currency retranslation gains/(losses) – movement during the year |
|
€ million 2019
|
|
|
€ million 2018 (Restated)(a) |
| ||
1 January |
(5,069 | ) | (4,230 | ) | ||||
Currency retranslation during the year: |
||||||||
Other reserves |
(18 | ) | (814 | ) | ||||
Retained profit |
2 | (10 | ) | |||||
Non-controlling interest |
1 | (15 | ) | |||||
31 December |
(5,084 | ) | (5,069 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
15C. Financial liabilities
Financial liabilities(b) |
€ million
Current 2019 |
€ million
Non-current 2019 |
€ million
Total 2019 |
€ million Current 2018 (Restated)(a) |
€ million Non-current 2018 (Restated)(a) |
€ million Total 2018 (Restated)(a) |
||||||||||||||||||
Bank loans and overdrafts(c) |
390 | 463 | 853 | 525 | 289 | 814 | ||||||||||||||||||
Bonds and other loans |
3,677 | 21,355 | 25,032 | 2,422 | 20,969 | 23,391 | ||||||||||||||||||
Lease liabilities |
383 | 1,536 | 1,919 | 390 | 1,591 | 1,981 | ||||||||||||||||||
Derivatives |
116 | 154 | 270 | 127 | 275 | 402 | ||||||||||||||||||
Other financial liabilities(d) |
125 | 58 | 183 | 149 | 1 | 150 | ||||||||||||||||||
4,691 | 23,566 | 28,257 | 3,613 | 23,125 | 26,738 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(b) | For the purposes of this note and note 17A, financial assets and liabilities exclude trade and other current receivables and trade payables and other liabilities which are covered in notes 13 and 14 respectively. |
(c) | Financial liabilities include €Nil million (2018: €5 million) of secured liabilities. |
(d) | Includes options and other financial liabilities to acquire non-controlling interests in EAC Myanmar, USA, Japan and Italy refer to note 21. |
Reconciliation of liabilities arising from financing activities
Non-cash movement | ||||||||||||||||||||||||||||
Movements in 2019 and 2018 |
Opening balance at 1 January € million |
Cash movement € million |
Business acquisitions/ disposals € million |
Foreign exchange changes € million |
Fair value changes € million |
Other movements € million |
Closing balance at 31 December € million |
|||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||
Bank loans and overdrafts(a) |
(814 | ) | (29 | ) | (1 | ) | (9 | ) | – | – | (853 | ) | ||||||||||||||||
Bonds and other loans(a) |
(23,391 | ) | (1,273 | ) | (3 | ) | (365 | ) | (1 | ) | 1 | (25,032 | ) | |||||||||||||||
Lease liabilities(b) |
(1,981 | ) | 452 | (7 | ) | (25 | ) | – | (358 | ) | (1,919 | ) | ||||||||||||||||
Derivatives |
(402 | ) | – | – | – | 132 | – | (270 | ) | |||||||||||||||||||
Other financial liabilities(a) |
(150 | ) | 30 | – | (8 | ) | – | (55 | ) | (183 | ) | |||||||||||||||||
Total |
(26,738 | ) | (820 | ) | (11 | ) | (407 | ) | 131 | (412 | ) | (28,257 | ) | |||||||||||||||
2018 (Restated) |
||||||||||||||||||||||||||||
Bank loans and overdrafts(a) |
(992 | ) | 158 | (10 | ) | 17 | – | 13 | (814 | ) | ||||||||||||||||||
Bonds and other loans(a) |
(22,709 | ) | (135 | ) | – | (543 | ) | – | (4 | ) | (23,391 | ) | ||||||||||||||||
Lease liabilities(b)(c) |
(2,118 | ) | 494 | – | 1 | – | (358 | ) | (1,981 | ) | ||||||||||||||||||
Derivatives |
(421 | ) | – | – | – | 19 | – | (402 | ) | |||||||||||||||||||
Other financial liabilities(a) |
(177 | ) | 51 | – | 10 | (4 | ) | (30 | ) | (150 | ) | |||||||||||||||||
Total |
(26,417 | ) | 568 | (10 | ) | (515 | ) | 15 | (379 | ) | (26,738 | ) |
(a) | These cash movements are included within the following lines in the consolidated cash flow statement: net change in short-term liabilities, additional financial liabilities and repayment of financial liabilities. The difference of €64 million (2018: €2 million) represents cash movements in overdrafts that are not included in financing cash flows. |
(b) | Lease liabilities cash movement is included within capital element of lease payments in the consolidated cash flow statement. The difference of €17 million (2018: €13 million) represents gain or loss from termination and modification of lease contracts. |
(c) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Annual Report on Form 20-F 2019 | 119 |
Notes to the Consolidated Financial Statements
Unilever Group continued
15C. Financial liabilities continued
Analysis of bonds and other loans
€ million Total 2019 |
€ million Total 2018 |
|||||||
Unilever N.V. |
||||||||
1.625% Notes 2033 (€) |
792 | 791 | ||||||
1.750% Bonds 2020 (€) |
750 | 749 | ||||||
0.500% Notes 2022 (€) |
747 | 746 | ||||||
1.375% Notes 2029 (€) |
743 | 743 | ||||||
1.125% Bonds 2027 (€) |
697 | 696 | ||||||
1.125% Bonds 2028 (€) |
694 | 693 | ||||||
0.875% Notes 2025 (€) |
647 | 647 | ||||||
0.500% Bonds 2025 (€) |
644 | 642 | ||||||
1.375% Notes 2030 (€) |
642 | 642 | ||||||
0.375% Notes 2023 (€) |
599 | 599 | ||||||
1.000% Notes 2027 (€) |
598 | 598 | ||||||
1.000% Notes 2023 (€) |
498 | 497 | ||||||
0.000% Notes 2021 (€) |
498 | 497 | ||||||
0.500% Notes 2023 (€) |
498 | 497 | ||||||
0.500% Notes 2024 (€) |
495 | 494 | ||||||
0.000% Notes 2020 (€) |
300 | 300 | ||||||
Total NV |
9,842 | 9,831 | ||||||
Unilever PLC |
||||||||
1.125% Notes 2022 (£) |
408 | 386 | ||||||
1.375% Notes 2024 (£) |
292 | 276 | ||||||
1.875% Notes 2029 (£) |
290 | 274 | ||||||
1.500% Notes 2026 (£) |
580 | – | ||||||
1.500% Notes 2039 (€) |
646 | – | ||||||
Total PLC |
2,216 | 936 | ||||||
Other group companies |
||||||||
Switzerland |
||||||||
Other |
24 | 10 | ||||||
United States |
||||||||
4.250% Notes 2021 ($) |
892 | 873 | ||||||
5.900% Bonds 2032 ($) |
883 | 865 | ||||||
2.900% Notes 2027 ($) |
879 | 860 | ||||||
2.200% Notes 2022 ($) |
755 | 738 | ||||||
1.800% Notes 2020 ($) |
714 | 698 | ||||||
3.500% Notes 2028 ($) |
703 | 687 | ||||||
4.800% Bonds 2019 ($) |
– | 656 | ||||||
2.200% Notes 2019 ($) |
– | 655 | ||||||
2.000% Notes 2026 ($) |
616 | 602 | ||||||
1.375% Notes 2021 ($) |
489 | 478 | ||||||
3.125% Notes 2023 ($) |
488 | 477 | ||||||
2.100% Notes 2020 ($) |
446 | 436 | ||||||
3.000% Notes 2022 ($) |
444 | 434 | ||||||
3.250% Notes 2024 ($) |
443 | 433 | ||||||
3.100% Notes 2025 ($) |
442 | 432 | ||||||
2.600% Notes 2024 ($) |
442 | 432 | ||||||
3.500% Bonds 2028 ($) |
441 | 431 | ||||||
2.750% Bonds 2021 ($) |
356 | 348 | ||||||
3.375% Notes 2025 ($) |
309 | 302 | ||||||
7.250% Bonds 2026 ($) |
260 | 254 | ||||||
6.625% Bonds 2028 ($) |
206 | 200 | ||||||
5.150% Notes 2020 ($) |
135 | 134 | ||||||
5.600% Bonds 2097 ($) |
82 | 80 | ||||||
2.125% Notes 2029 ($) |
749 | – | ||||||
2.600% Notes 2024 ($) |
457 | – | ||||||
Commercial paper ($) |
1,276 | 1,070 | ||||||
Other countries |
43 | 39 | ||||||
Total other group companies |
12,974 | 12,624 | ||||||
Total bonds and other loans |
25,032 | 23,391 |
Information in relation to the derivatives used to hedge bonds and other loans within a fair value hedge relationship is shown in note 16.
120 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
16. Treasury risk management
Derivatives and hedge accounting
Derivatives are measured at fair value with any related transaction costs expensed as incurred. The treatment of changes in the value of derivatives depends on their use as explained below.
(i) Fair value hedges(a)
Certain derivatives are held to hedge the risk of changes in value of a specific bond or other loan. In these situations, the Group designates the liability and related derivative to be part of a fair value hedge relationship. The carrying value of the bond is adjusted by the fair value of the risk being hedged, with changes going to the income statement. Gains and losses on the corresponding derivative are also recognised in the income statement. The amounts recognised are offset in the income statement to the extent that the hedge is effective. Ineffectiveness may occur if the critical terms do not exactly match, or if there is a value adjustment resulting from a change in credit risk (in either the Group or the counter-party to the derivative) that is not matched by the hedged item. When the relationship no longer meets the criteria for hedge accounting, the fair value hedge adjustment made to the bond is amortised to the income statement using the effective interest method.
(ii) Cash flow hedges(a)
Derivatives are also held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are classified as being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are recognised in equity. Cost of hedging, where material and opted for, is recorded in a separate account within equity. Any ineffective elements of the hedge are recognised in the income statement. Ineffectiveness may occur if there are changes to the expected timing of the hedged transaction. If the hedged cash flow relates to a non-financial asset, the amount accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts deferred in equity are taken to the income statement at the same time as the related cash flow.
When a derivative no longer qualifies for hedge accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative gain or loss is taken to the income statement. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken to the income statement immediately.
(iii) Net investment hedges(a)
Certain derivatives are designated as hedges of the currency risk on the Group’s investment in foreign subsidiaries. The accounting policy for these arrangements is set out in note 1.
(iv) Derivatives for which hedge accounting is not applied
Derivatives not classified as hedges are held in order to hedge certain balance sheet items and commodity exposures. No hedge accounting is applied to these derivatives, which are carried at fair value with changes being recognised in the income statement. |
(a) | Applying hedge accounting has not led to material ineffectiveness being recognised in the income statement for both 2019 and 2018. Fair value changes on basis spread is recorded in a separate account within equity. |
The Group is exposed to the following risks that arise from its use of financial instruments, the management of which is described in the following sections:
• | liquidity risk (see note 16A); |
• | market risk (see note 16B); and |
• | credit risk (see note 17B). |
The group’s risk management policies are established to set appropriate risk limits and controls, and to maintain adherence to these limits. These policies are in line with Unilever’s risk management framework.
16A. Management of liquidity risk
Liquidity risk is the risk that the Group will face in meeting its obligations associated with its financial liabilities. The Group’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Group’s credit rating, impair investor confidence and also restrict the Group’s ability to raise funds.
The Group maintained a cautious funding strategy. This was the result of cash delivery from the business, coupled with the proceeds from bond issuances. This cash has been invested conservatively with low risk counter-parties at maturities of less than six months.
Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, Unilever has committed credit facilities for general corporate use.
On 31 December 2019 Unilever had undrawn revolving 364-day bilateral credit facilities in aggregate of $7,865 million (2018: $7,865 million) with a 364-day term out. As part of the regular annual process, the intention is that these facilities will again be renewed in 2020.
Annual Report on Form 20-F 2019 | 121 |
Notes to the Consolidated Financial Statements
Unilever Group continued
16A. Management of liquidity risk continued
The following table shows Unilever’s contractually agreed undiscounted cash flows, including expected interest payments, which are payable under financial liabilities at the balance sheet date:
€ million | € million | € million | € million | € million | € million | € million | € million | |||||||||||||||||||||||||||||
Undiscounted cash flows |
Notes |
Due within 1 year |
Due between 1 and 2 years |
Due between 2 and 3 years |
Due between 3 and 4 years |
Due between 4 and 5 years |
Due after 5 years |
Total |
Net carrying amount as shown in balance sheet |
|||||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||||||
Non-derivative financial liabilities: |
||||||||||||||||||||||||||||||||||||
Bank loans and overdrafts |
(399 | ) | (9 | ) | (289 | ) | (164 | ) | – | (2 | ) | (863 | ) | (853 | ) | |||||||||||||||||||||
Bonds and other loans |
(4,169 | ) | (2,661 | ) | (2,745 | ) | (2,449 | ) | (2,454 | ) | (14,431 | ) | (28,909 | ) | (25,032 | ) | ||||||||||||||||||||
Lease liabilities |
(432 | ) | (392 | ) | (302 | ) | (242 | ) | (191 | ) | (720 | ) | (2,279 | ) | (1,919 | ) | ||||||||||||||||||||
Other financial liabilities |
(125 | ) | – | (24 | ) | (31 | ) | (26 | ) | – | (206 | ) | (183 | ) | ||||||||||||||||||||||
Trade payables, accruals and other liabilities |
(14,166 | ) | (93 | ) | (13 | ) | (8 | ) | (14 | ) | (42 | ) | (14,336 | ) | (14,336 | ) | ||||||||||||||||||||
Deferred consideration |
(39 | ) | (124 | ) | (8 | ) | – | (64 | ) | – | (235 | ) | (208 | ) | ||||||||||||||||||||||
(19,330 | ) | (3,279 | ) | (3,381 | ) | (2,894 | ) | (2,749 | ) | (15,195 | ) | (46,828 | ) | (42,531 | ) | |||||||||||||||||||||
Derivative financial liabilities: |
||||||||||||||||||||||||||||||||||||
Interest rate derivatives: |
(154 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
776 | 164 | 805 | 37 | 478 | 957 | 3,217 | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(756 | ) | (141 | ) | (797 | ) | (17 | ) | (473 | ) | (949 | ) | (3,133 | ) | ||||||||||||||||||||||
Foreign exchange derivatives: |
(168 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
8,783 | – | – | – | – | – | 8,783 | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(8,952 | ) | – | – | – | – | – | (8,952 | ) | |||||||||||||||||||||||||||
Commodity derivatives: |
(4 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(4 | ) | – | – | – | – | – | (4 | ) | |||||||||||||||||||||||||||
(153 | ) | 23 | 8 | 20 | 5 | 8 | (89 | ) | (326 | ) | ||||||||||||||||||||||||||
Total |
(19,483 | ) | (3,256 | ) | 3,373 | (2,874 | ) | (2,744 | ) | (15,187 | ) | (46,917 | ) | (42,857 | ) | |||||||||||||||||||||
2018 (Restated)(a) |
||||||||||||||||||||||||||||||||||||
Non-derivative financial liabilities: |
||||||||||||||||||||||||||||||||||||
Bank loans and overdrafts |
(529 | ) | (12 | ) | (1 | ) | (278 | ) | – | – | (820 | ) | (814 | ) | ||||||||||||||||||||||
Bonds and other loans |
(2,888 | ) | (2,748 | ) | (2,572 | ) | (2,646 | ) | (2,387 | ) | (14,090 | ) | (27,331 | ) | (23,391 | ) | ||||||||||||||||||||
Lease liabilities |
(441 | ) | (391 | ) | (305 | ) | (255 | ) | (212 | ) | (806 | ) | (2,410 | ) | (1,981 | ) | ||||||||||||||||||||
Other financial liabilities |
(149 | ) | (1 | ) | – | – | – | – | (150 | ) | (150 | ) | ||||||||||||||||||||||||
Trade payables, accruals and other liabilities |
(13,945 | ) | (140 | ) | (10 | ) | (5 | ) | (4 | ) | (14 | ) | (14,118 | ) | (14,118 | ) | ||||||||||||||||||||
Deferred consideration |
(14 | ) | (79 | ) | (70 | ) | (6 | ) | – | (45 | ) | (214 | ) | (187 | ) | |||||||||||||||||||||
(17,966 | ) | (3,371 | ) | (2,958 | ) | (3,190 | ) | (2,603 | ) | (14,955 | ) | (45,043 | ) | (40,641 | ) | |||||||||||||||||||||
Derivative financial liabilities: |
||||||||||||||||||||||||||||||||||||
Interest rate derivatives: |
(276 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
67 | 760 | 163 | 788 | 37 | 1,406 | 3,221 | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(23 | ) | (756 | ) | (138 | ) | (797 | ) | (17 | ) | (1,423 | ) | (3,154 | ) | ||||||||||||||||||||||
Foreign exchange derivatives: |
(192 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
17,108 | – | – | – | – | – | 17,108 | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(17,317 | ) | – | – | – | – | – | (17,317 | ) | |||||||||||||||||||||||||||
Commodity derivatives: |
(74 | ) | ||||||||||||||||||||||||||||||||||
Derivative contracts – receipts |
– | – | – | – | – | – | – | |||||||||||||||||||||||||||||
Derivative contracts – payments |
(74 | ) | – | – | – | – | – | (74 | ) | |||||||||||||||||||||||||||
(239 | ) | 4 | 25 | (9 | ) | 20 | (17 | ) | (216 | ) | (542 | ) | ||||||||||||||||||||||||
Total |
(18,205 | ) | (3,367 | ) | (2,933 | ) | (3,199 | ) | (2,583 | ) | (14,972 | ) | (45,259 | ) | (41,183 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
The Group has sublet a small proportion of leased properties. Related future minimum sublease payments are €21 million (2018: €18 million).
122 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
16A. Management of liquidity risk continued
The following table shows cash flows for which cash flow hedge accounting is applied. The derivatives in the cash flow hedge relationships are expected to have an impact on profit and loss in the same periods as the cash flows occur.
€ million Due within 1 year |
€ million Due between 1 and 2 years |
€ million Due between 2 and 3 years |
€ million Due between 3 and 4 years |
€ million Due between 4 and 5 years |
€ million
Due after 5 years |
€ million
Total |
€ million Net carrying amount of related derivatives(a) |
|||||||||||||||||||||||||
2019 |
||||||||||||||||||||||||||||||||
Foreign exchange cash inflows |
2,254 | – | – | – | – | – | 2,254 | – | ||||||||||||||||||||||||
Foreign exchange cash outflows |
(2,259 | ) | – | – | – | – | – | (2,259 | ) | – | ||||||||||||||||||||||
Interest rate swaps cash inflows |
811 | 442 | 1,182 | 536 | 478 | 957 | 4,406 | – | ||||||||||||||||||||||||
Interest rate swaps cash outflows |
(756 | ) | (347 | ) | (1,147 | ) | (464 | ) | (473 | ) | (949 | ) | (4,136 | ) | (29 | ) | ||||||||||||||||
Commodity contracts cash inflows |
31 | – | – | – | – | – | 31 | 31 | ||||||||||||||||||||||||
Commodity contracts cash outflows |
(4 | ) | – | – | – | – | – | (4 | ) | (4 | ) | |||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||
Foreign exchange cash inflows |
3,426 | – | – | – | – | – | 3,426 | – | ||||||||||||||||||||||||
Foreign exchange cash outflows |
(3,435 | ) | – | – | – | – | – | (3,435 | ) | 14 | ||||||||||||||||||||||
Interest rate swaps cash inflows |
103 | 795 | 433 | 1,158 | 525 | 1,406 | 4,420 | – | ||||||||||||||||||||||||
Interest rate swaps cash outflows |
(23 | ) | (756 | ) | (347 | ) | (1,147 | ) | (464 | ) | (1,423 | ) | (4,160 | ) | (199 | ) | ||||||||||||||||
Commodity contracts cash flows |
(74 | ) | – | – | – | – | – | (74 | ) | (74 | ) |
(a) | See note 16C. |
16B. Management of market risk
Unilever’s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
• | commodity price risk; |
• | currency risk; and |
• | interest rate risk. |
The above risks may affect the Group’s income and expenses, or the value of its financial instruments. The objective of the Group’s management of market risk is to maintain this risk within acceptable parameters, while optimising returns. Generally, the Group applies hedge accounting to manage the volatility in profit and loss arising from market risk.
Where the Group uses hedge accounting to mitigate the above risks, it is normally implemented centrally by either the Treasury or Commodity Risk Management teams, in line with their respective frameworks and strategies. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship continues to exist between the hedged item and hedging instrument. The Group generally enters into hedge relationships where the critical terms of the hedging instrument match exactly with the hedged item, meaning that the economic relationship between the hedged item and hedging instrument is evident, so only a qualitative assessment is performed. When a qualitative assessment is not considered sufficient, for example when the critical terms of the hedging instrument do not match exactly with the hedged item, a quantitative assessment of hedge effectiveness will also be performed. The hedge ratio is set on inception for all hedge relationships and is dependent on the alignment of the critical terms of the hedging instrument to the hedged item (in most instances these are matched, so the hedge ratio is 1:1).
The Group’s exposure to, and management of, these risks is explained below. It often includes derivative financial instruments, the uses of which are described in note 16C.
Potential impact of risk |
Management policy and hedging strategy |
Sensitivity to the risk | ||
(i) Commodity price risk
The Group is exposed to the risk of changes in commodity prices in relation to its purchase of certain raw materials.
At 31 December 2019, the Group had hedged its exposure to future commodity purchases with commodity derivatives valued at €439 million (2018: €580 million).
Hedges of future commodity purchases resulted in cumulative losses of €52 million (2018: losses of €25 million ) being reclassified to the income statement and losses of €28 million (2018: losses of €24 million) being recognised as a basis adjustment to inventory purchased. |
The Group uses commodity forwards, futures, swaps and option contracts to hedge against this risk. All commodity forward contracts hedge future purchases of raw materials and the contracts are settled either in cash or by physical delivery.
The Group also hedges risk, components of commodities where it is not possible to hedge the commodity in full. This is done with reference to the contract to purchase the hedged commodity.
Commodity derivatives are generally designated as hedging instruments in cash flow hedge accounting relations. All commodity derivative contracts are done in line with approvals from the Global Commodity Executive which is chaired by the Unilever Chief Supply Chain Officer (CSCO) or the Global Commodity Operating Team which is chaired by the Chief Procurement Officer. |
A 10% increase in commodity prices as at 31 December 2019 would have led to a €56 million gain on the commodity derivatives in the cash flow hedge reserve (2018: €51 million gain in the cash flow hedge reserve).
A decrease of 10% in commodity prices on a full-year basis would have the equal but opposite effect. | ||
Annual Report on Form 20-F 2019 | 123 |
Notes to the Consolidated Financial Statements
Unilever Group continued
16B. Management of market risk continued
Potential impact of risk |
Management policy and hedging strategy |
Sensitivity to the risk | ||
(ii) Currency risk
Currency risk on sales, purchases and borrowings
Because of Unilever’s global reach, it is subject to the risk that changes in foreign currency values impact the Group’s sales, purchases and borrowings.
The Group manages the foreign currency risk by hedging forecasted sales and purchase transactions that are expected to occur within a maximum 12-month period through layered hedging.
At 31 December 2019, the exposure to the Group from companies holding financial assets and liabilities other than in their functional currency amounted to €317 million (2018 restated for IFRS 16: €298 million). |
The Group manages currency exposures within prescribed limits, mainly through the use of forward foreign currency exchange contracts.
Operating companies manage foreign exchange exposures within prescribed limits.
The aim of the Group’s approach to management of currency risk is to leave the Group with no material residual risk. This aim has been achieved in all years presented. |
As an estimation of the approximate impact of the residual risk, with respect to financial instruments, the Group has calculated the impact of a 10% change in exchange rates.
Impact on income statement
A 10% strengthening of the foreign currencies against the respective functional currencies of group companies would have led to approximately an additional €32 million gain in the income statement (2018 restated for IFRS 16: €30 million gain).
A 10% weakening of the foreign currencies against the respective functional currencies of group companies would have led to an equal but opposite effect. |
124 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
Potential impact of risk |
Management policy and hedging strategy |
Sensitivity to the risk | ||
(iii) Interest rate risk(a)
The Group is exposed to market interest rate fluctuations on its floating rate debt. Increases in benchmark interest rates could increase the interest cost of our floating-rate debt and increase the cost of future borrowings. The Group’s ability to manage interest costs also has an impact on reported results.
The Group does not have any material floating interest bearing financial assets or any significant long-term fixed interest bearing financial assets. Consequently the Group’s interest rate risk arises mainly from financial liabilities other than lease liabilities.
Taking into account the impact of interest rate swaps, at 31 December 2019, interest rates were fixed on approximately 82% of the expected financial liabilities (excluding lease liabilities) for 2020, and 73% for 2021 (88% for 2019 and 77% for 2020 at 31 December 2018).
As at 31 December 2019, the Group had USD 4,500 million (2018: USD 4,500 million) of outstanding cross currency interest rate swaps (on which cash flow hedge accounting is applied).
For interest management purposes, transactions with a maturity shorter than six months from inception date are not included as fixed interest transactions.
The average interest rate on short-term borrowings in 2019 was 2.5% (2018: 0.9%). |
Unilever’s interest rate management approach aims for an optimal balance between fixed and floating-rate interest rate exposures on expected net debt. The objective of this approach is to minimise annual interest costs after tax.
This is achieved either by issuing fixed or floating-rate long-term debt, or by modifying interest rate exposure through the use of interest rate swaps.
The majority of the Group’s existing interest rate derivatives are designated as cash flow hedges and are expected to be effective. The fair value movement of these derivatives is recognised in the income statement, along with any changes in the relevant fair value of the underlying hedged asset or liability. |
Impact on income statement
Assuming that all other variables remain constant, a 1.0 percentage point increase in floating interest rates on a full-year basis as at 31 December 2019 would have led to an additional €37 million of finance cost (2018: €33 million additional finance costs).
A 1.0 percentage point decrease in floating interest rates on a full-year basis would have an equal but opposite effect.
Impact on equity – cash flow hedges
Assuming that all other variables remain constant, a 1.0 percentage point increase in interest rates on a full-year basis as at 31 December 2019 would have led to an additional €8 million credit in equity from derivatives in cash flow hedge relationships (2018: €17 million credit).
A 1.0 percentage point decrease in interest rates on a full-year basis would have led to an additional €8 million debit in equity from derivatives in cash flow hedge relationships (2018: €19 million debit). | ||
(a) | See the weighted average amount of net debt with fixed rate interest shown in the following table. |
The following table shows the split in fixed and floating-rate interest exposures, taking into account the impact of interest rate swaps and cross-currency swaps:
|
€ million 2019
|
|
|
€ million 2018 (Restated)(a) |
| |||
Current financial liabilities |
(4,691 | ) | (3,613 | ) | ||||
Non-current financial liabilities |
(23,566 | ) | (23,125 | ) | ||||
Total financial liabilities |
(28,257 | ) | (26,738 | ) | ||||
Less: lease liabilities |
(1,919 | ) | (1,981 | ) | ||||
Financial liabilities (excluding lease liabilities) |
(26,338 | ) | (24,757 | ) | ||||
Of which: |
||||||||
Fixed rate (weighted average amount of fixing for the following year) |
(22,618 | ) | (21,469 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Annual Report on Form 20-F 2019 | 125 |
Notes to the Consolidated Financial Statements
Unilever Group continued
16C. Derivatives and hedging
The Group does not use derivative financial instruments for speculative purposes. The uses of derivatives and the related values of derivatives are summarised in the following table. Derivatives used to hedge:
€ million
Trade and other receivables |
€ million
Current Financial assets |
€ million Non- Current Financial assets |
€ million Trade payables and other liabilities |
€ million
Current financial liabilities |
€ million Non- current financial liabilities |
€ million
Total |
||||||||||||||||||||||
31 December 2019 |
||||||||||||||||||||||||||||
Foreign exchange derivatives |
||||||||||||||||||||||||||||
Fair value hedges |
– | – | – | – | – | – | – | |||||||||||||||||||||
Cash flow hedges |
38 | – | – | (38 | ) | – | – | – | ||||||||||||||||||||
Hedges of net investments in foreign operations |
– | 30 | (a) | – | – | (14 | )(a) | – | 16 | |||||||||||||||||||
Hedge accounting not applied |
5 | (10) | (a) | – | (14 | ) | (102 | )(a) | – | (121 | ) | |||||||||||||||||
Cross-currency Interest rate swaps |
||||||||||||||||||||||||||||
Fair value hedges |
– | – | – | – | – | – | – | |||||||||||||||||||||
Cash flow hedges |
– | 114 | – | – | (143 | ) | (29 | ) | ||||||||||||||||||||
Hedge accounting not applied |
– | – | – | – | – | (11 | ) | (11 | ) | |||||||||||||||||||
Commodity contracts |
||||||||||||||||||||||||||||
Cash flow hedges |
31 | – | – | (4 | ) | – | – | 27 | ||||||||||||||||||||
Hedge accounting not applied |
– | – | – | – | – | – | – | |||||||||||||||||||||
74 | 20 | 114 | (56 | ) | (116 | ) | (154 | ) | (118 | ) | ||||||||||||||||||
Total assets | 208 | Total liabilities | (326 | ) | (118 | ) | ||||||||||||||||||||||
31 December 2018 |
||||||||||||||||||||||||||||
Foreign exchange derivatives |
||||||||||||||||||||||||||||
Fair value hedges |
– | – | – | – | – | – | – | |||||||||||||||||||||
Cash flow hedges |
39 | – | – | (25 | ) | – | – | 14 | ||||||||||||||||||||
Hedges of net investments in foreign operations |
– | 58 | (a) | – | – | (21 | )(a) | – | 37 | |||||||||||||||||||
Hedge accounting not applied |
42 | 67 | (a) | – | (41 | ) | (105 | )(a) | – | (37 | ) | |||||||||||||||||
Cross-currency Interest rate swaps |
||||||||||||||||||||||||||||
Fair value hedges |
– | – | – | – | – | – | – | |||||||||||||||||||||
Cash flow hedges |
– | 69 | – | – | – | (268 | ) | (199 | ) | |||||||||||||||||||
Hedge accounting not applied |
– | – | – | – | – | (8 | ) | (8 | ) | |||||||||||||||||||
Commodity contracts |
||||||||||||||||||||||||||||
Cash flow hedges |
– | – | – | (74 | ) | – | – | (74 | ) | |||||||||||||||||||
Hedge accounting not applied |
1 | – | – | – | – | – | 1 | |||||||||||||||||||||
82 | 194 | – | (140 | ) | (126 | ) | (276 | ) | (266 | ) | ||||||||||||||||||
Total assets | 276 | Total liabilities | (542 | ) | (266 | ) |
(a) | Swaps that hedge the currency risk on intra-group loans and offset ‘Hedges of net investments in foreign operations’ are included within ‘Hedge accounting not applied’. See below for further details. |
126 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
Master netting or similar agreements
A number of legal entities within our Group enter into derivative transactions under International Swap and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counter-party on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances, such as when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The ISDA agreements do not meet the criteria for offsetting the positive and negative values in the consolidated balance sheet. This is because the Group does not have any currently legally enforceable right to offset recognised amounts, between various Group and bank affiliates, because the right to offset is enforceable only on the occurrence of future credit events such as a default.
The column ‘Related amounts not set off in the balance sheet – Financial instruments’ shows the netting impact of our ISDA agreements, assuming the agreements are respected in the relevant jurisdiction.
(i) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements and similar agreements.
Related amounts not set off in the balance sheet |
||||||||||||||||||||||||
As at 31 December 2019 |
€ million
Gross amounts of recognised financial assets |
€ million Gross amounts of recognised financial assets set off in the balance sheet |
€ million
Net amounts of financial assets presented in the balance sheet |
€ million
Financial instruments |
€ million
Cash collateral received |
€ million
Net amount |
||||||||||||||||||
Derivative financial assets |
253 | (45 | ) | 208 | (130 | ) | (24 | ) | 54 | |||||||||||||||
As at 31 December 2018 |
||||||||||||||||||||||||
Derivative financial assets |
339 | (63 | ) | 276 | (164 | ) | (10 | ) | 102 |
(Ii) Financial liabilities
The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements.
Related amounts not set off in the balance sheet |
||||||||||||||||||||||||
As at 31 December 2019 |
€ million
Gross amounts of recognised financial liabilities |
€ million Gross amounts of recognised financial liabilities set off in the balance sheet |
€ million
Net amounts of financial liabilities presented in the balance sheet |
€ million
Financial instruments |
€ million
Cash collateral received |
€ million
Net amount |
||||||||||||||||||
Derivative financial liabilities |
(371 | ) | 45 | (326 | ) | 130 | – | (196 | ) | |||||||||||||||
As at 31 December 2018 |
||||||||||||||||||||||||
Derivative financial liabilities |
(605 | ) | 63 | (542 | ) | 164 | – | (378 | ) |
Annual Report on Form 20-F 2019 | 127 |
Notes to the Consolidated Financial Statements
Unilever Group continued
17. Investment and return
Cash and cash equivalents
Cash and cash equivalents in the balance sheet include deposits, investments in money market funds and highly liquid investments. To be classified as cash and cash equivalents, an asset must: • be readily convertible into cash; • have an insignificant risk of changes in value; and • have a maturity period of typically three months or less at acquisition.
Cash and cash equivalents in the cash flow statement also include bank overdrafts and are recorded at amortised cost.
Other financial assets
The Group classifies its financial assets into the following measurement categories: • those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and • those to be measured at amortised cost.
This classification depends on our business model for managing the financial asset and the contractual terms of the cash flows.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
All financial assets are either debt instruments or equity instruments. Debt instruments are those that provide the Group with a contractual right to receive cash or another asset. Equity instruments are those where the Group has no contractual right to receive cash or another asset.
Debt instruments
The subsequent measurement of debt instruments depends on the Groups business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories that debt instruments are classified as: • financial assets at amortised cost; • financial assets at fair value through other comprehensive income; or • financial assets at fair value through profit or loss.
(i) Amortised cost
Assets measured at amortised cost are those which are held to collect contractual cash flows on the repayment of principal or interest (SPPI). A gain or loss on a debt investment recognised at amortised cost on de-recognition or impairment is recognised in profit or loss. Interest income is recognised within finance income using the effective interest rate method.
(ii) Fair value through other comprehensive income
Assets that are held at fair value through other comprehensive income are those that are held to collect contractual cash flows on the repayment of principal and interest and which are held to recognise a capital gain through the sale of the asset. Movements in the carrying amount are recognised in other comprehensive income except for the recognition of impairment, interest income and foreign exchange gains or losses which are recognised in profit or loss. On de-recognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity to profit or loss. Interest income is included in finance income using the effective interest rate method.
(iii) Fair value through profit or loss
Assets that do not meet the criteria for either amortised cost or fair value through other comprehensive income are measured as fair value through profit or loss. Related transaction costs are expensed as incurred. Unless they form part of a hedging relationship, these assets are held at fair value, with changes being recognised in the income statement. Interest income from these assets is included within finance income.
Equity instruments
The Group subsequently measures all equity instruments at fair value. Where the Group has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains or losses to profit or loss. Dividends from these investments continue to be recognised in profit or loss.
Impairment of financial assets
Financial instruments classified as amortised cost and debt instruments classified as fair value through other comprehensive income are assessed for impairment. The Group assesses the probability of default of an asset at initial recognition and then whether there has been a significant increase in credit risk on an ongoing basis.
To assess whether there is a significant increase in credit risk the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Macroeconomic information (such as market interest rates or growth rates) is also considered.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. Impairment losses on assets classified as amortised cost are recognised in profit or loss. When a later event causes the impairment losses to decrease, the reduction in impairment loss is also recognised in profit or loss. Permanent impairment losses on debt instruments classified as fair value through other comprehensive income are recognised in profit or loss.
|
128 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
17. Investment and return continued
17A. Financial assets
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 2019 and 2018. The Group’s cash resources and other financial assets are shown below.
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Financial assets(a) |
Current 2019 |
Non- current 2019 |
Total 2019 |
Current 2018 |
Non- current 2018 |
Total 2018 |
||||||||||||||||||
Cash and cash equivalents |
||||||||||||||||||||||||
Cash at bank and in hand |
2,457 | – | 2,457 | 2,174 | – | 2,174 | ||||||||||||||||||
Short-term deposits with maturity of less than three months |
1,693 | – | 1,693 | 1,024 | – | 1,024 | ||||||||||||||||||
Other cash equivalents |
35 | – | 35 | 32 | – | 32 | ||||||||||||||||||
4,185 | – | 4,185 | 3,230 | – | 3,230 | |||||||||||||||||||
Other financial assets |
||||||||||||||||||||||||
Financial assets at amortised costb) |
578 | 220 | 798 | 382 | 247 | 629 | ||||||||||||||||||
Financial assets at fair value through other comprehensive income(c) |
– | 266 | 266 | 154 | 175 | 329 | ||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||
Derivatives |
20 | 114 | 134 | 194 | – | 194 | ||||||||||||||||||
Other(d) |
309 | 274 | 583 | 144 | 220 | 364 | ||||||||||||||||||
907 | 874 | 1,781 | 874 | 642 | 1,516 | |||||||||||||||||||
Total |
5,092 | 874 | 5,966 | 4,104 | 642 | 4,746 |
(a) | For the purposes of this note and note 15C, financial assets and liabilities exclude trade and other current receivables and trade payables and other liabilities which are covered in notes 13 and 14 respectively. |
(b) | 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 €136 million (2018: €128 million) and investments in bonds of €56 million (2018: €93 million). |
(c) | Included within non-current financial assets at fair value through other comprehensive income are equity investments of €244 million (2018: €148 million). These investments are not held by Unilever for trading purposes and hence the Group has opted to recognise fair value movements through other comprehensive income. The fair value movement in 2019 of these equity investments was €31 million (2018: €(9) million). |
(d) | Current Other Financial assets at fair value through profit or loss include A- or higher rated money and capital market instruments. 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 (see also note 4B) of €54 million (2018: €59 million) and investments in a number of companies and financial institutions in North America, North Asia, South Asia and Europe. |
There were no significant changes on account of change in business model in classification of financial assets since 31 December 2018.
There are no financial assets that are designated at fair value through profit or loss, which would otherwise have been measured at fair value through other comprehensive income.
Cash and cash equivalents reconciliation to the cash flow statement |
€ million 2019 |
€ million 2018 |
||||||
Cash and cash equivalents per balance sheet |
4,185 | 3,230 | ||||||
Less: bank overdrafts |
(69 | ) | (140 | ) | ||||
Cash and cash equivalents per cash flow statement |
4,116 | 3,090 |
Approximately €1 billion (or 24%) of the Group’s cash and cash equivalents are held in the parent and central finance companies, for maximum flexibility. These companies provide loans to our subsidiaries that are also funded through retained earnings and third party borrowings. We maintain access to global debt markets through an infrastructure of short and long-term debt programmes. We make use of plain vanilla derivatives, such as interest rate swaps and foreign exchange contracts, to help mitigate risks. More detail is provided in notes 16, 16A, 16B and 16C on pages 121 to 127.
The remaining €3.2 billion (76%) of the Group’s cash and cash equivalents are held in foreign subsidiaries which repatriate distributable reserves on a regular basis. For most countries, this is done through dividends which are in some cases subject to withholding or distribution tax. This balance includes €146 million (2018: €154 million, 2017: €206 million) of cash that is held in a few countries where we face cross-border foreign exchange controls and/or other legal restrictions that inhibit our ability to make these balances available for general use by the wider business. The cash will generally be invested or held in the relevant country and, given the other capital resources available to the Group, does not significantly affect the ability of the Group to meet its cash obligations.
Annual Report on Form 20-F 2019 | 129 |
Notes to the Consolidated Financial Statements
Unilever Group continued
17. Investment and return continued
17B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its contractual obligations. Additional information in relation to credit risk on trade receivables is given in note 13. These risks are generally managed by local controllers. Credit risk related to the use of treasury instruments, including those held at amortised cost and at fair value through other comprehensive income, is managed on a Group basis. This risk arises from transactions with financial institutions involving cash and cash equivalents, deposits and derivative financial instruments. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. To reduce this risk, Unilever has concentrated its main activities with a limited number of counter-parties which have secure credit ratings. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Group’s treasury department. Netting agreements are also put in place with Unilever’s principal counter-parties. In the case of a default, these arrangements would allow Unilever to net assets and liabilities across transactions with that counter-party. To further reduce the Group’s credit exposures on derivative financial instruments, Unilever has collateral agreements with Unilever’s principal counter-parties in relation to derivative financial instruments. Under these arrangements, counter-parties are required to deposit securities and/or cash as a collateral for their obligations in respect of derivative financial instruments. At 31 December 2019 the collateral held by Unilever under such arrangements amounted to €24 million (2018: €10 million), of which €24 million (2018: €10 million) was in cash, and €Nil million (2018: €Nil million) was in the form of bond securities. The non-cash collateral has not been recognised as an asset in the Group’s balance sheet.
Further details in relation to the Group’s exposure to credit risk are shown in note 13 and note 16A.
18. Financial instruments fair value risk
The Group is exposed to the risks of changes in fair value of its financial assets and liabilities. The following table summarises the fair values and carrying amounts of financial instruments.
€ million | € million | € million | € million | |||||||||||||
Carrying | Carrying | |||||||||||||||
Fair value | Fair value | amount | amount | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Fair values of financial assets and financial liabilities | (Restated)(a) | (Restated)(a) | ||||||||||||||
Financial assets |
||||||||||||||||
Cash and cash equivalents |
4,185 | 3,230 | 4,185 | 3,230 | ||||||||||||
Financial assets at amortised cost |
798 | 629 | 798 | 629 | ||||||||||||
Financial assets at fair value through other comprehensive income |
266 | 329 | 266 | 329 | ||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||
Derivatives |
134 | 194 | 134 | 194 | ||||||||||||
Other |
583 | 364 | 583 | 364 | ||||||||||||
5,966 | 4,746 | 5,966 | 4,746 | |||||||||||||
Financial liabilities |
||||||||||||||||
Bank loans and overdrafts |
(853 | ) | (816 | ) | (853 | ) | (814 | ) | ||||||||
Bonds and other loans |
(26,525 | ) | (23,691 | ) | (25,032 | ) | (23,391 | ) | ||||||||
Lease liabilities |
(1,919 | ) | (1,981 | ) | (1,919 | ) | (1,981 | ) | ||||||||
Derivatives |
(270 | ) | (402 | ) | (270 | ) | (402 | ) | ||||||||
Other financial liabilities |
(183 | ) | (150 | ) | (183 | ) | (150 | ) | ||||||||
(29,750 | ) | (27,040 | ) | (28,257 | ) | (26,738 | ) |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
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.
The instruments that have a fair value that is different from the carrying amount are classified as Level 2 for both 2018 and 2019.
Fair value hierarchy
The fair values shown in notes 15C and 17A have been classified into three categories depending on the inputs used in the valuation technique. The categories used are as follows:
• | Level 1: quoted prices for identical instruments; |
• | Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and |
• | Level 3: inputs which are not based on observable market data. |
130 | Annual Report on Form 20-F 2019 |
Financial Statements |
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18. Financial instruments fair value risk continued
For assets and liabilities which are carried at fair value, the classification of fair value calculations by category is summarised below:
€ million | € million | € million | € million | € million | € million | € million | € million | |||||||||||||||||||||||||||||
Total fair | Total fair | |||||||||||||||||||||||||||||||||||
Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | Level 3 | value | value | |||||||||||||||||||||||||||||
Notes | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||
Assets at fair value |
||||||||||||||||||||||||||||||||||||
Financial assets at fair value through other comprehensive income |
17A | 7 | 160 | 4 | 5 | 255 | 164 | 266 | 329 | |||||||||||||||||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||||||||||||||||||||||
Derivatives(a) |
16C | – | – | 208 | 276 | – | – | 208 | 276 | |||||||||||||||||||||||||||
Other |
17A | 311 | 145 | – | – | 272 | 219 | 583 | 364 | |||||||||||||||||||||||||||
Liabilities at fair value |
||||||||||||||||||||||||||||||||||||
Derivatives(b) |
16C | – | – | (326 | ) | (542 | ) | – | – | (326 | ) | (542 | ) | |||||||||||||||||||||||
Contingent consideration |
14 | – | – | – | – | (154 | ) | (142 | ) | (154 | ) | (142 | ) |
(a) | Includes €74 million (2018: €82 million) derivatives, reported within trade receivables, that hedge trading activities. |
(b) | Includes €(56) million (2018: €(140) 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 2018. There were also no significant movements between the fair value levels since 31 December 2018.
The impact in 2019 income statement due to level 3 instruments is a loss of €9 million (2018: gain of €272 million).
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities is given below:
Reconciliation of movements in Level 3 valuations |
€ million 2019 |
€ million 2018 |
||||||
1 January |
241 | (101 | ) | |||||
Gains and losses recognised in income statement |
(9 | ) | 272 | |||||
Gains and losses recognised in other comprehensive income |
43 | (9 | ) | |||||
Purchases and new issues |
83 | 4 | ||||||
Sales and settlements |
15 | 75 | ||||||
31 December |
373 | 241 |
Significant unobservable inputs used in level 3 fair values
The largest asset valued using Level 3 techniques is an executive Life Insurance of €18 million (2018: €17 million). A change in one or more of the inputs to reasonably possible alternative assumptions would not change the value significantly.
The gains and losses recognised in 2018 income statement includes a credit from early settlement of contingent consideration for Blueair.
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 2018.
Assets and liabilities carried at fair value
• | The fair values of quoted investments falling into Level 1 are based on current bid prices. |
• | The fair values of unquoted financial assets at fair value through other comprehensive income and at fair value through profit or loss are based on recent trades in liquid markets, observable market rates, discounted cash flow analysis and statistical modelling techniques such as the Monte Carlo simulation. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. |
• | Derivatives are valued using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodities. |
• | For listed securities where the market is not liquid, and for unlisted securities, valuation techniques are used. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow calculations. |
Annual Report on Form 20-F 2019 | 131 |
Notes to the Consolidated Financial Statements
Unilever Group continued
18. Financial instruments fair value risk continued
Other financial assets and liabilities (fair values for disclosure purposes only)
• | Cash and cash equivalents, trade and other current receivables, bank loans and overdrafts, trade payables and other current liabilities have fair values that approximate to their carrying amounts due to their short-term nature. |
• | The fair values of listed bonds are based on their market value. |
• | Non-listed bonds, other loans, bank loans and non-current receivables and payables are based on the net present value of the anticipated future cash flows associated with these instruments using rates currently available for debt on similar terms, credit risk and remaining maturities. |
Policies and processes used in relation to the calculation of level 3 fair values
Assets valued using Level 3 valuation techniques are primarily made up of long-term cash receivables and unlisted investments. Valuation techniques used are specific to the circumstances involved. Unlisted investments include €403 million (2018: €254 million) of investments within Unilever Ventures companies.
19. Provisions
Provisions are recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. |
Provisions |
€ million 2019 |
€ million 2018 |
||||||
Due within one year |
620 | 624 | ||||||
Due after one year |
664 | 697 | ||||||
Total provisions |
1,284 | 1,321 |
€ million | € million | € million | € million | € million | ||||||||||||||||
Brazil | ||||||||||||||||||||
Movements during 2019 | Restructuring | Legal | indirect taxes | Other | Total | |||||||||||||||
1 January 2019 |
445 | 143 | 203 | 530 | 1,321 | |||||||||||||||
Income Statement: |
||||||||||||||||||||
Charges |
371 | 59 | 15 | 107 | 552 | |||||||||||||||
Releases |
(75 | ) | (10 | ) | (10 | ) | (62 | ) | (157 | ) | ||||||||||
Utilisation |
(257 | ) | (38 | ) | (7 | ) | (54 | ) | (356 | ) | ||||||||||
Reclassification(a) |
(18 | ) | (7 | ) | (75 | ) | 28 | (72 | ) | |||||||||||
Currency translation |
4 | 2 | 2 | (12 | ) | (4 | ) | |||||||||||||
31 December 2019 |
470 | 149 | 128 | 537 | 1,284 |
(a) | Includes an amount transferred to impairment provision relating to Brazil indirect tax assets. See note 13. |
Restructuring provisions primarily include people costs such as redundancy costs and cost of compensation where manufacturing, distribution, service or selling agreements are to be terminated. The group expects these provisions to be substantially utilised within the next few years.
The Group is involved from time to time in legal and arbitration proceedings arising in the ordinary course of business. 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 specific issues arise, provisions are made to the extent appropriate. Due to the nature of the legal cases, the timing of utilisation of these provisions is uncertain.
Provisions for Brazil indirect taxes are comprised of disputes with Brazilian authorities, in particular relating to tax credits that can be taken for the PIS and COFINS indirect taxes. These provisions are separate from the matters listed as contingent liabilities in note 20; Unilever does not have provisions and contingent liabilities for the same matters. Due to the nature of disputed indirect taxes the timing of utilisation of these provisions is uncertain.
Other includes provisions for indirect taxes in countries other than Brazil, interest on tax provisions and provisions for various other matters. The timing of utilisation of these provisions is uncertain.
132 | Annual Report on Form 20-F 2019 |
Financial Statements |
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20. Commitments and contingent liabilities
Lease commitments are the future cash out flows from the lease contracts which are not recorded in the measurement of lease liabilities. These include potential future payments related to leases of low value assets, leases which are less than twelve months, variable leases, extension and termination options and leases not yet commenced but which we have committed to.
Contingent liabilities are either possible obligations that will probably not require a transfer of economic benefits, or present obligations that may, but probably will not, require a transfer of economic benefits. It is not appropriate to make provisions for contingent liabilities, but there is a chance that they will result in an obligation in the future. Assessing the amount of liabilities that are not probable is highly judgemental so contingent liabilities are disclosed on the basis of the known maximum exposure.
|
Commitments
€ million | € million | € million | € million | |||||||||||||
Leases | Leases | Other | Other | |||||||||||||
2019 | 2018 | commitments | commitments | |||||||||||||
Lease commitments and other commitments fall due as follows: | (Restated)(a) | 2019 | 2018 | |||||||||||||
Within 1 year |
69 | 65 | 791 | 1,099 | ||||||||||||
Later than 1 year but not later than 5 years |
111 | 89 | 684 | 780 | ||||||||||||
Later than 5 years |
43 | 20 | 23 | 31 | ||||||||||||
223 | 174 | 1,498 | 1,910 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Other commitments principally comprise commitments under contract to purchase materials and services. They do not include commitments to purchase property, plant and equipment, which are reported in note 10 on pages 111 to 112.
Adoption of IFRS 16
On adoption of IFRS 16, previously disclosed commitments for fixed lease payments have been recognised on the balance sheet and are now excluded from lease commitments. Other lease commitments are included in the table above. All prior year numbers have been restated.
Contingent liabilities
Contingent liabilities are possible obligations that are not probable. They arise in respect of litigation against group companies, investigations by competition, regulatory and fiscal authorities and obligations arising under environmental legislation. In many markets, there is a high degree of complexity involved in the local tax regimes. The majority of contingent liabilities are in respect of fiscal matters in Brazil.
Assessing the amount of liabilities that are not probable is highly judgemental. Contingent liabilities are disclosed on the basis of the known maximum exposure. In the case of fiscal matters the known maximum exposure is the amount included on a tax assessment.
A summary of our contingent liabilities is shown in the table below:
€ million 2019 |
€ million 2018 |
|||||||
Corporate reorganisation – IPI, PIS and COFINS taxes and penalties(a) |
2,235 | 2,032 | ||||||
Inputs for PIS and COFINS taxes |
43 | 52 | ||||||
Goodwill amortisation |
184 | 177 | ||||||
Other tax assessments – approximately 600 cases |
959 | 916 | ||||||
Total Brazil Tax |
3,421 | 3,177 | ||||||
Other contingent liabilities |
789 | 481 | ||||||
Total contingent liabilities |
4,210 | 3,658 |
(a) | During 2004, and in common with many other businesses operating in Brazil, one of our Brazilian subsidiaries received a notice of infringement from the Federal Revenue Service in respect of indirect taxes. The notice alleges that a 2001 reorganisation of our local corporate structure was undertaken without valid business purpose. The 2001 reorganisation was comparable with restructurings done by many companies in Brazil. The original dispute was resolved in the courts in the Group’s favour. However, in 2013 a new assessment was raised in respect of a similar matter. Additionally, during the course of 2014 and again in 2017, 2018 and 2019 other notices of infringement were issued based on the same grounds argued in the previous assessments. The total amount of the tax assessments in respect of this matter is €2,235 million (2018: €2,032 million). The judicial process in Brazil is likely to take a number of years to conclude. |
The Group believes that the likelihood that the Brazilian tax authorities will ultimately prevail is low, however there can be no guarantee of success in court. In each case we believe our position is strong so they have not been provided for and are considered to be contingent liabilities. Due to the fiscal environment in Brazil the possibility of further tax assessments related to the same matters cannot be ruled out. We expect that three of our largest tax litigation cases, which represent around €1.8 billion of contingent liabilities, will move from the Administrative to the Judicial Courts during 2020 although the timing is uncertain. When this happens, we will be required to make a judicial deposit or provide a guarantee in respect of the disputed tax, interest and penalties. The judicial process in Brazil is likely to take a number of years to conclude.
The contingent liabilities reported for indirect taxes relating to disputes with the Brazilian authorities are separate from the provisions listed in note 19; Unilever does not have provision and contingent liabilities for the same matters.
In 2019, a tax assessment was issued in connection with UK tax audit that commenced in 2015. The total amount of the tax assessment in respect of this matter is €141 million and is included in other contingent liabilities. The UK tax authorities are reviewing the allocation of taxable income related to intangible assets and centralised services as between Unilever N.V. and Unilever PLC, and whether Unilever N.V. has a permanent establishment in the UK. These arrangements have been in place and consistently applied by Unilever for many years and have been previously reviewed and accepted by the UK tax authorities. The period of review is for the years from 2011 to 2017, and the €141 million tax assessment is in respect of an alleged Unilever N.V. permanent establishment in the UK for 2015. Unilever strongly disagrees with the positions taken by the UK tax authorities and believes that the positions as filed in UK tax returns are in accordance with the tax legislation. Given the potential impact of any adjustment on the allocation of taxable income between Unilever N.V. and Unilever PLC, with potential consequential effects for Dutch taxable income, we have filed a protective Mutual Agreement Procedure with the Dutch and UK authorities.
Discussions with the UK tax authorities are ongoing and there is recognition that significant further work is required before any further tax assessments can be issued and that the issues raised overlap in whole or part and therefore require a sequenced resolution. On the basis of the tax assessment issued the maximum exposure could be up to €600 million.
Annual Report on Form 20-F 2019 | 133 |
Notes to the Consolidated Financial Statements
Unilever Group continued
21. Acquisitions and disposals
Business combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at which control is transferred to the Group.
Goodwill is measured at the acquisition date as the fair value of consideration transferred, plus non-controlling interests and the fair value of any previously held equity interests less the net recognised amount (which is generally fair value) of the identifiable assets and liabilities assumed. Goodwill is subject to an annual review for impairment (or more frequently if necessary) in accordance with our accounting policies. Any impairment is charged to the income statement as it arises. Detailed information relating to goodwill is provided in note 9 on pages 108 to 110.
Transaction costs are expensed as incurred, within non-underlying items.
Changes in ownership that do not result in a change of control are accounted for as equity transactions and therefore do not have any impact on goodwill. The difference between consideration and the non-controlling share of net assets acquired is recognised within equity.
|
2019
In 2019, the Group completed the business acquisitions and disposals as listed below. In each case 100% of the businesses were acquired unless stated otherwise. Total consideration for 2019 acquisitions is €1,167 million (2018: €1,194 million for acquisitions completed during that year). More information related to the 2019 acquisitions is provided on page 135 to 136.
Deal completion date |
Acquired/disposed business | |
28 January 2019 |
Acquired the Laundress, a global premium eco-friendly laundry care business in the US. The acquisition expands our portfolio into the premium home care market. | |
5 February 2019 |
Acquired Graze, the leading healthy snacking business in the UK. The acquisition accelerates our presence in the healthy snacking and out of home markets. | |
1 March 2019 |
Sold the global Alsa baking and dessert business to Dr. Oetker. | |
5 April 2019 |
Acquired Garancia, a derma-cosmetic business in France. The acquisition strengthens our prestige portfolio in the pharmacy channel. | |
21 May 2019 |
Acquired Olly Nutrition, a US based vitamins, minerals and supplements business that accelerates our presence and competitiveness in the wellness market. | |
28 June 2019 |
Acquired Fluocaril and Parogencyl oral care businesses in France and Spain. The acquisition complements our existing oral care portfolio and strengthens our distribution in the European pharmacy channel. | |
26 July 2019 |
Acquired 95% of Tatcha, a leading prestige skin care business in the US. Tatcha is a modern skin care brand with a focus on natural ingredients, product experience, premium design and packaging quality. | |
30 August 2019 |
Acquired Astrix, a personal and home care business in Bolivia that further strengthens our local market competitiveness. | |
1 October 2019 |
Acquired 70% of Lenor, a premium skin care business based in Japan. The acquisition expands our portfolio into Japanese beauty, premium face and derma care in Japan and China. | |
1 October 2019 |
Acquired 75% of FruFru, a healthy food business in Romania which accelerates our local presence and competitiveness in the healthy food market. |
As previously announced, in December 2018 the Group signed an agreement to acquire the health food drinks portfolio of GlaxoSmithKline in India, Bangladesh and 20 other predominantly Asian markets primarily to acquire the Horlicks and Boost brands. The deal is now expected to complete during the first half of 2020. The consideration is payable via a combination of €642 million cash and shares of Hindustan Unilever Limited. Based on the share price of Hindustan Unilever Limited and exchange rates at 31 December 2019, the total consideration for the acquisition was valued at approximately €5,086 million.
Effect on consolidated income statement
The acquisition deals completed in 2019 have contributed €227 million to Group revenue and €5 million to Group operating profit since the relevant acquisition dates.
If the acquisition deals completed in 2019 had all taken place at the beginning of the year, Group revenue would have been €52,165 million and Group operating profit would have been €8,724 million.
134 | Annual Report on Form 20-F 2019 |
Financial Statements |
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21. Acquisitions and disposals continued
2018
In 2018 the Group completed the following business acquisitions and disposals as listed below. For businesses acquired, the acquisition accounting has been finalised and subsequent changes to the provisional numbers published last year were immaterial.
Deal completion date |
Acquired/disposed business | |
15 January 2018 |
Acquired the remaining 2% non-controlling interest of Carver Korea bringing the Group’s ownership to 100%. | |
28 February 2018 |
Acquired Quala beauty & personal and home care business in Latin America. | |
2 July 2018 |
Sold the global Spreads business (excluding Southern Africa) to KKR. | |
2 July 2018 |
Sold the Spreads business in Southern Africa to Remgro plus a cash consideration of €306 million in exchange for Remgro’s 25.75% shareholding in Unilever South Africa. | |
27 September 2018 |
Acquired Adityaa Milk, an ice cream business in India. The acquisition strengthens Unilever front end distribution reach in India. | |
1 October 2018 |
Acquired 75% of Equilibra, the Italian personal care and wellbeing business. The acquisition complements Unilever’s product range through its presence in the ‘natural’ personal care segment. | |
1 November 2018 |
Acquired Betty Ice, a leading ice cream business in Romania. The acquisition enriches Unilever’s product range through local offerings and price tiers. | |
3 December 2018 |
Acquired Denny Ice, an ice cream business in Bulgaria to strengthen local product knowledge. | |
31 December 2018 |
Acquired Vegetarian Butcher, a vegetarian meat replacement, foods business in the Netherlands. The acquisition fits with Unilever’s strategy to expand its portfolio into plant-based foods responding to the growing trend of vegetarian and vegan meals. |
Effect on consolidated balance sheet
Acquisitions
The following table sets out the effect of the acquisitions in 2019, 2018 and 2017 on the consolidated balance sheet. The fair values currently used for opening balances of all acquisitions made in 2019 are provisional, with the exception of the Laundress and Graze whose opening balance sheets were finalised within 2019. Balances remain provisional due to missing relevant information about facts and circumstances that existed as of the acquisition date and where valuation work is still ongoing.
Detailed information relating to goodwill is provided in note 9 on pages 108 to 110. The value of goodwill which is expected to be tax deductible is €160 million.
€ million 2019 |
€ million 2018 |
€ million 2017 |
||||||||||
Net assets acquired |
771 | 815 | 2,423 | |||||||||
Non-controlling interest |
(25 | ) | (17 | ) | (50 | ) | ||||||
Goodwill |
421 | 496 | 2,539 | |||||||||
Total payment for acquisition |
1,167 | 1,294 | 4,912 | |||||||||
Exchange rate gain/(loss) on cash flow hedge |
– | (100 | ) | 51 | ||||||||
Total consideration |
1,167 | 1,194 | 4,963 |
Annual Report on Form 20-F 2019 | 135 |
Notes to the Consolidated Financial Statements
Unilever Group continued
21. Acquisitions and disposals continued
In 2019 the net assets acquired and total payment for acquisitions consist of:
€ million 2019 |
||||
Intangible assets |
787 | |||
Other non-current assets |
37 | |||
Trade and other receivables |
58 | |||
Other current assets |
94 | |||
Non-current liabilities |
(128 | ) | ||
Current liabilities |
(77 | ) | ||
Net assets acquired |
771 | |||
Non-controlling interest |
(25 | ) | ||
Goodwill |
421 | |||
Exchange rate gain/(loss) on cash flow hedges |
– | |||
Cash consideration |
1,149 | |||
Deferred consideration |
18 | |||
Total consideration |
1,167 |
No contingent liabilities were acquired in the acquisitions described above.
Goodwill represents the future value which the Group believes it will obtain through operational synergies and the application of acquired company ideas to existing Unilever channels and businesses.
Disposals
Total consideration for 2019 disposals is €169 million (2018: €7,590 million for disposals completed during that year). The following table sets out the effect of the disposals in 2019, 2018 and 2017 on the consolidated balance sheet. The results of disposed businesses are included in the consolidated financial statements up to their date of disposal.
€ million 2019 |
€ million 2018 |
€ million 2017 |
||||||||||
Goodwill and intangible assets |
82 | 2,510 | 71 | |||||||||
Other non-current assets |
19 | 666 | 92 | |||||||||
Current assets |
15 | 261 | 10 | |||||||||
Trade creditors and other payables |
(12 | ) | (107 | ) | (8 | ) | ||||||
Net assets sold |
104 | 3,330 | 165 | |||||||||
(Gain)/loss on recycling of currency retranslation on disposal |
– | (71 | ) | 66 | ||||||||
Profit/(loss) on sale attributable to Unilever |
65 | 4,331 | 332 | |||||||||
Consideration |
169 | 7,590 | 563 | |||||||||
Cash |
168 | 7,135 | 560 | |||||||||
Cash balances of businesses sold |
1 | 321 | – | |||||||||
Non-cash items and deferred consideration |
– | 134 | 3 | |||||||||
169 | 7,590 | 563 |
On 1 March 2019 Unilever sold the global Alsa baking and dessert business to Dr. Oetker for €155 million cash consideration. Goodwill of €27 million was allocated from the Foods & Refreshment CGUs. Profit on the disposal was €57 million, recognised as a non-underlying item (see note 3).
136 | Annual Report on Form 20-F 2019 |
Financial Statements |
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22. Assets and liabilities held for sale
Non-current assets and groups of assets and liabilities which comprise disposal groups are classified as ‘held for sale’ when all of the following criteria are met: a decision has been made to sell; the assets are available for sale immediately; the assets are being actively marketed; and a sale has been agreed or is expected to be concluded within 12 months of the balance sheet date.
Immediately prior to classification as held for sale, the assets or groups of assets are remeasured in accordance with the Group’s accounting policies. Subsequently, assets and disposal groups classified as held for sale are valued at the lower of book value or fair value less disposal costs. Assets held for sale are neither depreciated nor amortised.
|
€ million 2019 Total |
€ million 2018 Total |
|||||||
Disposal groups held for sale(a) |
||||||||
Goodwill and intangibles |
3 | 82 | ||||||
Property, plant and equipment |
13 | 19 | ||||||
Inventories |
9 | 8 | ||||||
Trade and other receivables |
1 | 2 | ||||||
Other |
3 | 4 | ||||||
29 | 115 | |||||||
Property, plant and equipment held for sale(b) |
53 | 4 | ||||||
Assets held for sale |
82 | 119 | ||||||
Liabilities held for sale |
1 | 11 |
(a) | In 2018, disposal groups held for sale consists of assets mainly relating to Alsa baking and dessert business which was disposed during 2019. |
(b) | 2019 includes manufacturing assets held for sale in various countries. |
23. Related party transactions
A related party is a person or entity that is related to the Group. These include both people and entities that have, or are subject to, the influence or control of the Group.
|
The following related party balances existed with associate or joint venture businesses at 31 December:
Related party balances |
€ million 2019 |
€ million 2018 |
||||||
Trading and other balances due from joint ventures |
123 | 121 | ||||||
Trading and other balances due from/(to) associates |
– | – |
Joint ventures
Sales by Unilever group companies to Unilever FIMA, LDA and Pepsi Lipton joint ventures were €108 million and €60 million in 2019 (2018: €107 million and €65 million) respectively. Sales from Unilever FIMA, LDA and from Pepsi Lipton joint ventures to Unilever group companies were €67 million and €46 million in 2019 (2018: €83 million and €51 million) respectively. Royalties and service fee paid by Unilever FIMA LDA to Unilever group companies were €15 million (2018: €16 million). Balances owed by/(to) Unilever FIMA, LDA and Pepsi Lipton joint ventures at 31 December 2019 were €128 million and €(5) million (2018: €127 million and €(6) million) respectively.
Associates
Langholm Capital Partners invests in private European companies with above-average longer-term growth prospects.
Langholm Capital II was launched in 2009. Unilever has invested €64 million in Langholm Capital II, with an outstanding commitment at the end of 2019 of €11 million (2018: €13 million). During 2019, Unilever received €0 million (2018: €0.3 million) from its investment in Langholm Capital II.
Annual Report on Form 20-F 2019 | 137 |
Notes to the Consolidated Financial Statements
Unilever Group continued
24. Restatement impact of IFRS 16
Upon adoption of IFRS 16, the Group has recognised leases on the balance sheet with a right-of-use asset and related lease liability. Refer to note 1 for a summary of accounting for leases under the new standard. The Group has restated all prior periods for the impact of IFRS 16 in line with the ‘full retrospective approach’. The Group has chosen not to recognise short-term leases, which are those less than 12 months, and leases of low-value assets on the balance sheet.
Financial statement impact
The following tables summarise the impact of adopting IFRS 16 on the Group’s consolidated financial statements. Only restated lines have been included in the following tables:
(A) Balance sheet
The Group recognised leased assets on the balance sheet representing the right to use of the underlying assets from the lease contracts. Current and non-current lease liabilities were also recognised for the present value of the lease payments due under the lease contracts. Deferred tax adjustments are due to temporary timing differences arising from the recognition of leased assets and lease liabilities. Shareholders’ equity has been restated to reflect the cumulative impact of IFRS 16 on retained earnings and currency translation adjustment as a result of IFRS 16 restatement of foreign subsidiaries.
€ million As at 31 December 2018 |
€ million As at 31 December 2017 |
|||||||||||||||||||||||
Consolidated balance sheet items | As previously reported |
Adjustments for IFRS 16 |
Restated | As previously reported |
Adjustments for IFRS 16 |
Restated | ||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Property, plant and equipment |
10,347 | 1,741 | 12,088 | 10,411 | 1,859 | 12,270 | ||||||||||||||||||
Deferred tax assets |
1,117 | 35 | 1,152 | 1,085 | 33 | 1,118 | ||||||||||||||||||
Other non-current assets |
648 | (118 | ) | 530 | 557 | (116 | ) | 441 | ||||||||||||||||
Total non-current assets |
43,975 | 1,658 | 45,633 | 43,302 | 1,776 | 45,078 | ||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Trade and other current receivables |
6,485 | (3 | ) | 6,482 | 5,222 | (3 | ) | 5,219 | ||||||||||||||||
Total current assets |
15,481 | (3 | ) | 15,478 | 16,983 | (3 | ) | 16,980 | ||||||||||||||||
Total assets |
59,456 | 1,655 | 61,111 | 60,285 | 1,773 | 62,058 | ||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Financial liabilities |
3,235 | 378 | 3,613 | 7,968 | 410 | 8,378 | ||||||||||||||||||
Total current liabilities |
19,772 | 378 | 20,150 | 23,177 | 410 | 23,587 | ||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Financial liabilities |
21,650 | 1,475 | 23,125 | 16,462 | 1,577 | 18,039 | ||||||||||||||||||
Deferred tax liabilities |
1,923 | (23 | ) | 1,900 | 1,913 | (25 | ) | 1,888 | ||||||||||||||||
Total non-current liabilities |
27,392 | 1,452 | 28,844 | 22,721 | 1,552 | 24,273 | ||||||||||||||||||
Total liabilities |
47,164 | 1,830 | 48,994 | 45,898 | 1,962 | 47,860 | ||||||||||||||||||
Equity |
||||||||||||||||||||||||
Shareholders’ equity |
||||||||||||||||||||||||
Other reserves |
(15,286 | ) | 68 | (15,218 | ) | (13,633 | ) | 46 | (13,587 | ) | ||||||||||||||
Retained profit |
26,265 | (243 | ) | 26,022 | 26,648 | (235 | ) | 26,413 | ||||||||||||||||
11,572 | (175 | ) | 11,397 | 13,629 | (189 | ) | 13,440 | |||||||||||||||||
Total equity |
12,292 | (175 | ) | 12,117 | 14,387 | (189 | ) | 14,198 | ||||||||||||||||
Total liabilities and equity |
59,456 | 1,655 | 61,111 | 60,285 | 1,773 | 62,058 |
Only impacted lines and key sub-totals are presented in the table above.
138 | Annual Report on Form 20-F 2019 |
Financial Statements |
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24. Restatement impact of IFRS 16 continued
(B) Income statement and statement of comprehensive income
Operating profit has been restated to remove operating lease payments previously recognised and to recognise depreciation expense on the leased assets that are now recognised on the balance sheet. Interest expense on lease liabilities has been recognised within finance costs. Adjustments to taxation are due to the change in profit before taxation. Currency translation gains/losses have also been restated to reflect the foreign exchange impact of IFRS 16 on subsidiaries that do not have a euro functional currency.
€ million For the year ended 31 December 2018 |
€ million For the year ended 31 December 2017 |
|||||||||||||||||||||||
Consolidated income statement |
As previously reported |
Adjustments for IFRS 16 |
Restated | As previously reported |
Adjustments for IFRS 16 |
Restated | ||||||||||||||||||
Operating profit |
12,535 | 104 | 12,639 | 8,857 | 100 | 8,957 | ||||||||||||||||||
Finance costs |
(591 | ) | (127 | ) | (718 | ) | (556 | ) | (127 | ) | (683 | ) | ||||||||||||
Profit before taxation |
12,383 | (23 | ) | 12,360 | 8,153 | (27 | ) | 8,126 | ||||||||||||||||
Taxation |
(2,575 | ) | 3 | (2,572 | ) | (1,667 | ) | (3 | ) | (1,670 | ) | |||||||||||||
Net profit |
9,808 | (20 | ) | 9,788 | 6,486 | (30 | ) | 6,456 | ||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Shareholders’ equity |
9,389 | (20 | ) | 9,369 | 6,053 | (30 | ) | 6,023 | ||||||||||||||||
€ million For the year ended 31 December 2018 |
€ million For the year ended 31 December 2017 |
|||||||||||||||||||||||
Consolidated statement of comprehensive income | As previously reported |
Adjustments for IFRS 16 |
Restated | As previously reported |
Adjustments for IFRS 16 |
Restated | ||||||||||||||||||
Net profit |
9,808 | (20 | ) | 9,788 | 6,486 | (30 | ) | 6,456 | ||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||
Items that may be reclassified subsequently to profit or loss, net of tax: |
||||||||||||||||||||||||
Currency retranslation gains/(losses) |
(861 | ) | 22 | (839 | ) | (983 | ) | 48 | (935 | ) | ||||||||||||||
Total comprehensive income |
8,615 | 2 | 8,617 | 6,710 | 18 | 6,728 | ||||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Non-controlling interests |
407 | – | 407 | 381 | – | 381 | ||||||||||||||||||
Shareholders’ equity |
8,208 | 2 | 8,210 | 6,329 | 18 | 6,347 |
Only impacted lines and key sub-totals are presented in the tables above.
(C) Cash flow statement
There is no impact on overall cash flows on the Group from the adoption of IFRS 16. However, cash outflows for lease payments have been reclassified from cash flows from operating activities to cash flows used in financing activities.
€ million For the year ended 31 December 2018 |
€ million For the year ended 31 December 2017 |
|||||||||||||||||||||||
Consolidated statement of cash flows | As previously reported |
Adjustments for IFRS 16 |
Restated | As previously reported |
Adjustments for IFRS 16 |
Restated | ||||||||||||||||||
Net profit |
9,808 | (20 | ) | 9,788 | 6,486 | (30 | ) | 6,456 | ||||||||||||||||
Taxation |
2,575 | (3 | ) | 2,572 | 1,667 | 3 | 1,670 | |||||||||||||||||
Net finance costs |
481 | 127 | 608 | 877 | 127 | 1,004 | ||||||||||||||||||
Operating profit |
12,535 | 104 | 12,639 | 8,857 | 100 | 8,957 | ||||||||||||||||||
Depreciation, amortisation and impairment |
1,747 | 469 | 2,216 | 1,538 | 487 | 2,025 | ||||||||||||||||||
Elimination of (profits)/losses on disposal |
(4,299 | ) | (14 | ) | (4,313 | ) | (298 | ) | – | (298 | ) | |||||||||||||
Other adjustments |
(266 | ) | 6 | (260 | ) | (153 | ) | – | (153 | ) | ||||||||||||||
Cash flows from operating activities |
9,047 | 565 | 9,612 | 9,456 | 587 | 10,043 | ||||||||||||||||||
Net cash flows from operating activities |
6,753 | 565 | 7,318 | 7,292 | 587 | 7,879 | ||||||||||||||||||
Interest paid |
(477 | ) | (94 | ) | (571 | ) | (470 | ) | (104 | ) | (574 | ) | ||||||||||||
Capital element of finance lease rental payments |
(10 | ) | 10 | – | (14 | ) | 14 | – | ||||||||||||||||
Capital element of lease payments |
– | (481 | ) | (481 | ) | – | (497 | ) | (497 | ) | ||||||||||||||
Net cash flows (used in)/from financing activities |
(11,548 | ) | (565 | ) | (12,113 | ) | (1,433 | ) | (587 | ) | (2,020 | ) |
Only impacted lines and key sub-totals are presented in the table above.
Annual Report on Form 20-F 2019 | 139 |
Notes to the Consolidated Financial Statements
Unilever Group continued
24. Restatement impact of IFRS 16 continued
(D) Impact on earnings per share
Basic and diluted earnings per share have been restated to reflect the restated net profit attributable to shareholders’ equity as per the income statement.
2018 | 2017 | |||||||||||||||
Combined earnings per share | As previously reported |
Restated | As previously reported |
Restated | ||||||||||||
Basic earnings per share |
€3.50 | €3.49 | €2.16 | €2.15 | ||||||||||||
Diluted earnings per share |
€3.48 | €3.48 | €2.15 | €2.14 | ||||||||||||
Underlying earnings per share |
€2.36 | €2.35 | €2.24 | €2.23 | ||||||||||||
€ million 2018 | € million 2017 | |||||||||||||||
As previously reported |
Restated |
As previously reported |
Restated | |||||||||||||
Net profit |
9,808 | 9,788 | 6,486 | 6,456 | ||||||||||||
Non-controlling interests |
(419 | ) | (419 | ) | (433 | ) | (433 | ) | ||||||||
Net profit attributable to shareholders’ equity – used for basic and diluted earnings per share |
9,389 | 9,369 | 6,053 | 6,023 | ||||||||||||
Post tax impact of non-underlying items |
(3,024 | ) | (3,024 | ) | 262 | 262 | ||||||||||
Underlying profit attributable to shareholders’ equity – used for underlying earnings per share |
6,365 | 6,345 | 6,315 | 6,285 |
(E) Impact on segment information
Segment information for the Group’s divisions and geographical areas has been restated. Operating profit, underlying operating profit, operating margin and underlying operating margin have been restated to reflect the impact of IFRS 16 adoption on the income statement as follows:
Segment information | € million Beauty & Personal Care |
€ million Foods & Refreshment |
€ million Care |
€ million
Total |
||||||||||||
2018 |
||||||||||||||||
Operating profit |
||||||||||||||||
As previously reported |
4,130 | 7,245 | 1,160 | 12,535 | ||||||||||||
Adjustments for IFRS 16 |
35 | 42 | 27 | 104 | ||||||||||||
Restated |
4,165 | 7,287 | 1,187 | 12,639 | ||||||||||||
Underlying operating profit |
||||||||||||||||
As previously reported |
4,508 | 3,534 | 1,317 | 9,359 | ||||||||||||
Adjustments for IFRS 16 |
35 | 42 | 27 | 104 | ||||||||||||
Restated |
4,543 | 3,576 | 1,344 | 9,463 | ||||||||||||
Depreciation and amortisation |
||||||||||||||||
As previously reported |
510 | 773 | 256 | 1,539 | ||||||||||||
Adjustments for IFRS 16 |
176 | 176 | 117 | 469 | ||||||||||||
Restated |
686 | 949 | 373 | 2,008 | ||||||||||||
2017 |
||||||||||||||||
Operating profit |
||||||||||||||||
As previously reported |
4,103 | 3,616 | 1,138 | 8,857 | ||||||||||||
Adjustments for IFRS 16 |
37 | 41 | 22 | 100 | ||||||||||||
Restated |
4,140 | 3,657 | 1,160 | 8,957 | ||||||||||||
Underlying operating profit |
||||||||||||||||
As previously reported |
4,375 | 3,737 | 1,288 | 9,400 | ||||||||||||
Adjustments for IFRS 16 |
37 | 41 | 23 | 100 | ||||||||||||
Restated |
4,412 | 3,778 | 1,311 | 9,500 | ||||||||||||
Depreciation and amortisation |
||||||||||||||||
As previously reported |
488 | 802 | 248 | 1,538 | ||||||||||||
Adjustments for IFRS 16 |
153 | 257 | 77 | 487 | ||||||||||||
Restated |
641 | 1,059 | 325 | 2,025 |
140 | Annual Report on Form 20-F 2019 |
Financial Statements |
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24. Restatement impact of IFRS 16 continued
(E) Impact on segment information continued
Regional | € million Asia/AMET/RUB |
€ million The Americas |
€ million Europe |
€ million Total |
||||||||||||
2018 |
||||||||||||||||
Operating profit |
||||||||||||||||
As previously reported |
4,777 | 3,586 | 4,172 | 12,535 | ||||||||||||
Adjustments for IFRS 16 |
47 | 35 | 22 | 104 | ||||||||||||
Restated |
4,824 | 3,621 | 4,194 | 12,639 | ||||||||||||
Underlying operating profit |
||||||||||||||||
As previously reported |
4,340 | 2,694 | 2,325 | 9,359 | ||||||||||||
Adjustments for IFRS 16 |
47 | 35 | 22 | 104 | ||||||||||||
Restated |
4,387 | 2,729 | 2,347 | 9,463 | ||||||||||||
2017 |
||||||||||||||||
Operating profit |
||||||||||||||||
As previously reported |
3,802 | 3,086 | 1,969 | 8,857 | ||||||||||||
Adjustments for IFRS 16 |
45 | 34 | 21 | 100 | ||||||||||||
Restated |
3,847 | 3,120 | 1,990 | 8,957 | ||||||||||||
Underlying operating profit |
||||||||||||||||
As previously reported |
4,108 | 3,063 | 2,229 | 9,400 | ||||||||||||
Adjustments for IFRS 16 |
45 | 34 | 21 | 100 | ||||||||||||
Restated |
4,153 | 3,097 | 2,250 | 9,500 |
25. Remuneration of auditors
This note includes all amounts paid to the Group’s auditors, whether in relation to their audit of the Group or otherwise. During the year the Group (including its subsidiaries) obtained the following services from the Group auditors and its associates:
€ million 2019 |
€ million 2018 |
€ million 2017 |
||||||||||||
Fees payable to the Group’s auditors for the audit of
the consolidated and parent company accounts of |
|
5 | 6 | 4 | ||||||||||
Fees payable to the Group’s auditors for the audit of
accounts of subsidiaries of Unilever N.V. and Unilever PLC pursuant to |
12 | 10 | 10 | |||||||||||
Total statutory audit fees(c) |
17 | 16 | 14 | |||||||||||
Audit-related assurance services |
– | (d) | – | (d) | – | (d) | ||||||||
Other taxation advisory services |
– | (d) | – | (d) | – | (d) | ||||||||
Services relating to corporate finance transactions |
– | – | – | |||||||||||
Other assurance services |
– | (e) | 5 | (e) | 5 | (e) | ||||||||
All other non-audit services |
– | (d) | – | (d) | – | (d) |
(a) | Of which €1 million was payable to KPMG Accountants N.V. (2018: €1 million; 2017: €1 million) and €4 million was payable to KPMG LLP (2018: €5 million; 2017: €4 million). |
(b) | Comprises fees payable to the KPMG network of independent member firms affiliated with KPMG International Cooperative for audit work on statutory financial statements and Group reporting returns of subsidiary companies. |
(c) | Amount payable to KPMG in respect of services supplied to associated pension schemes was less than €1 million individually and in aggregate (2018: less than €1 million individually and in aggregate; 2017: less than €1 million individually and in aggregate). |
(d) | Amounts paid in relation to each type of service are less than €1 million individually and in aggregate (2018: less than €1 million; 2017: €1 million). |
(e) | 2018 includes €4 million (2017: €5 million) for audits and reviews of carve-out financial statements of the Spreads business and €1 million (2017: €Nil) for assurance work on Simplification. |
26. Events after the balance sheet date
Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of these events is adjusted within the financial statements. Otherwise, events after the balance sheet date of a material size or nature are disclosed below. |
Dividend
On 30 January 2020 Unilever announced a quarterly dividend with the 2019 fourth quarter results of €0.4104 per NV ordinary share and £0.3472 per PLC ordinary share. The total value of the announced dividend is €1,073 million.
Annual Report on Form 20-F 2019 | 141 |
Notes to the Consolidated Financial Statements
Unilever Group continued
27. Significant subsidiaries
The following represents the significant subsidiaries of the Group as 31 December 2019, that principally affect the turnover, profit and net assets of the Group. The percentage of share capital is shown below represents the aggregate percentage of equity capital directly or indirectly held by NV or PLC in the company. The companies are incorporated and principally operated in the countries under which they are shown except where stated otherwise.
Country | Name of company | NV % | PLC% | |||||
Argentina |
Unilever de Argentina S.A. | 64.55 | 35.45 | |||||
Australia |
Unilever Australia Limited | – | 100 | |||||
Bangladesh |
Unilever Bangladesh Limited | – | 60.75 | |||||
Brazil |
Unilever Brasil Ltda. | 64.55 | 35.45 | |||||
Canada |
Unilever Canada Inc. | 64.55 | 35.45 | |||||
China |
Walls (China) Co. Ltd. | 100.00 | – | |||||
China |
Unilever Services (Hefei) Co Ltd | 100.00 | – | |||||
England and Wales |
Unilever UK & CN Holdings Limited | – | 100 | |||||
England and Wales |
Unilever U.K. Holdings Limited | – | 100 | |||||
England and Wales |
Unilever UK Limited | 5.61 | 94.39 | |||||
France |
Unilever France S.A.S | 64.54 | 35.45 | |||||
Germany |
Unilever Deutschland GmbH | 64.55 | 35.45 | |||||
Germany |
Unilever Deutschland Holding GmbH | 64.55 | 35.45 | |||||
India |
Hindustan Unilever Limited | – | 67.18 | |||||
Indonesia |
PT Unilever Indonesia, Tbk. | 54.86 | 30.13 | |||||
Italy |
Unilever Italia Mkt Operations S.R.L | 100.00 | – | |||||
Japan |
Unilever Japan Customer Marketing K.K. | 100.00 | – | |||||
Mexico |
Unilever de Mexico, S. de R.I. de C.V. | 64.55 | 35.45 | |||||
Netherlands |
Mixhold B.V. | 64.55 | 35.45 | |||||
Netherlands |
Unilever Finance International B.V. | 100.00 | – | |||||
Netherlands |
Unilever Nederland B.V. | 100.00 | – | |||||
Netherlands |
Unilever Europe B.V. | 100.00 | – | |||||
Netherlands |
UNUS Holding B.V. | 55.40 | 44.60 | |||||
Pakistan |
Unilever Pakistan Limited | – | 99.27 | |||||
Philippines |
Unilever Philippines, Inc. | 64.55 | 35.45 | |||||
Russia |
OOO Unilever Rus | 11.89 | 88.11 | |||||
Singapore |
Unilever Asia Private Limited | 100.00 | – | |||||
South Africa |
Unilever South Africa (Pty) Limited | 8.98 | 91.02 | |||||
Spain |
Unilever Espana S.A. | 100.00 | – | |||||
Switzerland |
Unilever ASCC AG | 100.00 | – | |||||
Switzerland |
Unilever Finance International AG | 100.00 | – | |||||
Switzerland |
Unilever Supply Chain Company AG | 100.00 | – | |||||
Thailand |
Unilever Thai Trading Limited | 64.55 | 35.45 | |||||
Turkey |
Unilever Sanayi ve Ticaret Turk A.S | 64.54 | 35.44 | |||||
United Arab Emirates |
Unilever General Trading LLC | – | 49.00 | |||||
USA |
Conopco, Inc. | 55.40 | 44.60 | |||||
USA |
Unilever Capital Corporation | 55.40 | 44.60 | |||||
USA |
Unilever United States, Inc. | 55.40 | 44.60 | |||||
Vietnam |
Unilever Vietnam International Company Limited | 100.00 | – |
Due to the inclusion of certain partnerships in the consolidated group financial statements of Unilever, para 264(b) of the German trade law grants an exemption from the duty to prepare individual statutory financial statements and management reports in accordance with the requirements for limited liability companies and to have these audited and published.
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Financial Statements |
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As at 31 December 2019
In accordance with Articles 2:379 and 2:414 of the Dutch Civil Code and Section 409 of the Companies Act 2006 a list of subsidiaries, partnerships, associates and joint ventures as at 31 December 2019 is set out below. All subsidiary undertakings are subsidiary undertakings of their immediate parent undertaking(s) pursuant to section 1162 (2) (a) of the Companies Act 2006 unless otherwise indicated – see the notes on page 160. All subsidiary undertakings not included in the consolidation are not included because they are not material for such purposes. All associated undertakings are included in the Unilever Group’s financial statements using the equity method of accounting unless otherwise indicated – see the notes on page 160. See page 142 of the Annual Report and Accounts for a list of the significant subsidiaries.
Companies are listed by country and under their registered office address. The aggregate percentage of capital held by the Unilever Group is shown after the subsidiary company name, except where it is 100%. If the Nominal Value field is blank, then the Share Class Note will identify the type of interest held in the entity.
Subsidiary undertakings included in the consolidation
Annual Report on Form 20-F 2019 | 153 |
Group Companies continued
154 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Annual Report on Form 20-F 2019 | 155 |
Group Companies continued
156 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Annual Report on Form 20-F 2019 | 157 |
Group Companies continued
158 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Annual Report on Form 20-F 2019 | 159 |
Group Companies continued
Notes:
1: Ordinary, 2: Ordinary-A, 3: Ordinary-B, 4: Partnership, 5: Quotas, 6: Class- A Common, 7: Common, 8: Class A, 9: Class B, 10: Class C, 11: Class II Common, 12: Class III Common, 13: Membership Interest, 14: Preference, 15: Redeemable Preference, 16: Limited by Guarantee, 17: C Ordinary Shares, 18: Viscountcy, 19: Redeemable Golden Share, 20: Deferred, 21: Ordinary-C, 22: Preferred, 23: Redeemable Preference Class A, 24: Redeemable Preference Class B, 25: Special, 26: Cumulative Preference, 27: 5% Cumulative Preference, 28: Non-Voting Ordinary B, 29: Common B, 30:Management, 31: Dormant, 32: A, 33: B, 34: Cumulative Redeemable Preference, 35: A-Ordinary, 36: Preferred Ordinary, 37: Ordinary-G, 38: Class Common-B, 39: Series A Participating Preference, 40: H-Ordinary, 41: I-Ordinary, 42: J-Ordinary, 43: Series A Preferred Convertible, 44: A Preferred, 45: A1 Preferred, 46: B Preferred, 47: Series 2 Preferred, 48: Series 3 Preferred, 49:Series A2 Convertible Redeemable Preference, 50: D Preferred, 51: Series A-3 Preferred, 52: C Preferred, 53:E Ordinary, 54: G Preferred, 55: Series Seed, 56: Nominal, 57: Preferred A, 58: Series A Preferred, 59: Series Seed-2 Preferred, 60: Series C-2, 61: Series D, 62: Series A1 Preferred, 63: Series B-2 Preference, 64: Class A Interests, 65: Class B Interests, 66. Ownership Units, 67. Seed B CCPS, 68. Office Holders, 69. Security, 70. Series B-3 Preference, 71. Series B Preferred, 72. Series Seed B CPPS, 73. Series A CPPS, 74. Series A2 CPPS, 75. Equity, 76. Series B CPPS, 77. Series B Preferred Convertible, 78. Class A Ordinary Redeemable Non Voting Ordinary, 79. B Ordinary Shares, 80. N Preferred, 81. A-1 Com, 82. A-2 Com, 83. A-3 Com, 84. Series A EIS, 85. Series A Convertible Preferred, 86. Series A Preferred, 87. Series B Preferred, 88. Series C Preferred, 89. Series A1 CPPS, 90. N Ordinary, 91. Series E, 92. Series C-2 Pref, 93. Series B-1 Preferred, 94. Series B-2 Preferred, 95. Series C-1 Pref, 96. B3 Ordinary.
* | Indicates an undertaking for which Unilever N.V. has issued a declaration of assumption of liability in accordance with Article 2:403 of the Dutch Civil Code. |
o | Indicates an undertaking directly held by N.V. or PLC. All other undertakings are indirectly held. In the case of Hindustan Unilever Limited 51.48% is directly held and the remainder of 15.70% is indirectly held. In the case of Unilever Kenya Limited 39.13% is directly held and the remainder of 60.87% is indirectly held. In the case of Unilever Sri Lanka Limited 5.49% is directly held and the remainder of 94.51% is indirectly held. In the case of Mixhold B.V. 27.71% is directly held and the remainder of 72.29% is indirectly held. In the cases of each of Unilever Gida Sarayi ve Ticaret A.Ş. and Unilever Sarayi ve Ticaret Turk A.Ş. a fractional amount is directly held and the remainder is indirectly held. In the case of United Holdings Limited, the ordinary shares are directly held and the preferred shares are indirectly held. In the case of Mixhold N.V., 55.37% of the ordinary – A shares are directly held, the remainder of 44.63% are indirectly held and the other share classes are indirectly held. In the case of Naamlooze Vernootschap Elma the ordinary shares are directly held and the cumulative preference shares are indirectly held. |
† | Shares the undertaking holds in itself. |
D | Denotes an undertaking where other classes of shares are held by a third party. |
X | Binzagr Unilever Limited, Unilever Home and Personal Care Products Manufacturing LLC and UTIC Distribution S.A. are subsidiary undertakings pursuant to section 1162(2)(b) Companies Act 2006. Severn Gulf FZCO is a subsidiary undertaking pursuant to section 1162(4)(a) Companies Act 2006. The Unilever Group is entitled to 50% of the profits made by Binzagr Unilever Limited. The Unilever Group is entitled to 80% of the profits made by Unilever Home and Personal Care Products Manufacturing LLC and Unilever General Trading LLC. |
◇ | Accounted for as non-current investments within non-current financial assets. |
¥ | Exemption pursuant to Section 264b German Commercial Code. |
Further to the above disclosures (1) due to the unified board of Unilever N.V. and Unilever PLC, Unilever N.V. and Unilever PLC are each considered to be a subsidiary undertaking of the other in accordance with section 1162 (4) (b) of the Companies Act 2006 and (2) details of holdings of subsidiary undertakings in the share capitals of Unilever N.V. and Unilever PLC are given under the heading Our Shares on pages 51 to 52.
In addition, we have revenues either from our own operations or otherwise in the following locations: Afghanistan, Albania, Andorra, Angola, Antigua, Armenia, Azerbaijan, Bahamas, Barbados, Belarus, Belize, Benin, Bhutan, Bosnia and Herzegovina, Botswana, Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Democratic Republic of Congo, Dominica, Equatorial Guinea, Eritrea, Fiji, Gabon, Gambia, Georgia, Grenada, Guinea, Guinea-Bissau, Guyana, Iceland, Iraq, Kiribati, Kuwait, Kyrgyzstan, Lesotho, Liberia, Libya, Liechtenstein, Luxembourg, Macedonia, Madagascar, Maldives, Mali, Malta, Marshall Islands, Martinique, Mauritania, Mauritius, Micronesia (Federated States of), Monaco, Mongolia, Montenegro, Namibia, Nauru, Palau, Papua New Guinea, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Senegal, Seychelles, Sierra Leone, Slovenia, Solomon Islands, Somalia, South Sudan, Sudan, Suriname, Swaziland, Syrian Arab Republic, Tajikistan, Timor Leste, Togo, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu and Yemen.
The Unilever Group has established branches in Argentina, Azerbaijan, Cote d’Ivoire, Cuba, the Dominican Republic, Kazakhstan, the Philippines, Saudi Arabia, Slovenia, Turkey and the United Kingdom.
160 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Financial calendar
Annual general meetings
Voting and | ||||||||||||
Date | Voting Record date | Registration date | ||||||||||
NV |
30 April 2020 | 2 April 2020 | 23 April 2020 | |||||||||
PLC |
29 April 2020 | – | 27 April 2020 |
Quarterly dividends
Dates listed below are applicable to all four Unilever listings (NV ordinary shares, PLC ordinary shares, NV New York shares, and PLC ADRs).
Announcement date | Ex-dividend date | Record date | Payment date | |||||||||||||
Quarterly dividend announced |
30 January 2020 | 20 February 2020 | 21 February 2020 | 18 March 2020 | ||||||||||||
Quarterly dividend announced |
23 April 2020 | 14 May 2020 | 15 May 2020 | 4 June 2020 | ||||||||||||
Quarterly dividend announced |
23 July 2020 | 6 August 2020 | 7 August 2020 | 9 September 2020 | ||||||||||||
Quarterly dividend announced |
22 October 2020 | 5 November 2020 | 6 November 2020 | 2 December 2020 |
Annual Report on Form 20-F 2019 | 161 |
Financial Statements |
![]() |
Additional information for US listing purposes
Form 20-F references | ||||||
Item 1 |
Identity of Directors, Senior Management and Advisers | n/a | ||||
Item 2 |
Offer Statistics and Expected Timetable | n/a | ||||
Item 3 |
Key Information | |||||
A. | Selected Financial Data | 117, 166, 172 – 173 | ||||
B. | Capitalisation and Indebtedness | n/a | ||||
C. | Reasons for the offer and use of proceeds | n/a | ||||
D. | Risk factors | 33 – 39 | ||||
Item 4 |
Information on the Company | |||||
A. | History and development of the company | 4, 6, 21, 24 – 32, 47, 51, 53, 90, 111 – 112, 134 – 136, 161 | ||||
B. | Business overview | 2 – 3, 24 – 32, 39, 42, 45, 47, 93 – 95, 167 | ||||
C. | Organisational structure | 47, 142 | ||||
D. | Property, plant and equipment | 111 – 112, 167 – 168 | ||||
Item 4A |
Unresolved Staff Comments | n/a | ||||
Item 5 |
Operating and Financial Review and Prospects | |||||
A. | Operating results | 6, 8, 23 – 32, 39, 42, 45, 124 | ||||
B. | Liquidity and capital resources | 26 – 27, 33, 78, 90, 111 – 112, 116, 119 – 120, 121 – 133 | ||||
C. | Research and development, patents and licences, etc. | 10, 95 – 96, 167 | ||||
D. | Trend information | 6, 6, 24 – 32, 35 – 39 | ||||
E. | Off-balance sheet arrangements | 121 – 127, 130 – 133 | ||||
F. | Tabular disclosure of contractual obligations | 27 | ||||
G. | Safe harbour | inside back cover | ||||
Item 6 |
Directors, Senior Management and Employees | |||||
A. | Directors and senior management | 49, 50, 165 | ||||
B. | Compensation | 60 – 77, 97 – 104 | ||||
C. | Board practices | 47 – 49, 54 – 55, 58, 60, 71 – 72, 165 | ||||
D. | Employees | 97, 165 | ||||
E. | Share ownership | 63 – 77, 103 – 104, 165 | ||||
Item 7 |
Major Shareholders and Related Party Transactions | |||||
A. | Major shareholders | 51 – 52, 166 | ||||
B. | Related party transactions | 137, 166 | ||||
C. | Interest of experts and counsel | n/a | ||||
Item 8 |
Financial Information | |||||
A. | Consolidated statements and other financial information | 78 – 79, 87 – 142, 161, 166, 173 – 178 | ||||
B. | Significant changes | 141 | ||||
Item 9 |
The Offer and Listing | |||||
A. | Offer and listing details | 51 | ||||
B. | Plan of distribution | n/a | ||||
C. | Markets | 51 | ||||
D. | Selling shareholders | n/a | ||||
E. | Dilution | n/a | ||||
F. | Expenses of the issue | n/a |
Annual Report on Form 20-F 2019 | 163 |
Additional information for US listing purposes continued
Item 10 |
Additional Information | |||||
A. | Share capital | n/a | ||||
B. | Articles of association | 47 – 53, 58, 69 | ||||
C. | Material contracts | 47, 167 | ||||
D. | Exchange controls | 167 | ||||
E. | Taxation | 168 – 169 | ||||
F. | Dividends and paying agents | n/a | ||||
G. | Statement by experts | n/a | ||||
H. | Documents on display | 161, 167 | ||||
I. | Subsidiary information | n/a | ||||
Item 11 |
Quantitative and Qualitative Disclosures About Market Risk | 98 – 103, 114 – 116, 121 – 128, 130 – 132 | ||||
Item 12 |
Description of Securities Other than Equity Securities | |||||
A. | Description of debt securities | n/a | ||||
B. | Description of warrants and rights | n/a | ||||
C. | Description of other securities | n/a | ||||
D.1 | Name of depositary and address of principal executive | n/a | ||||
D.2 | Title of ADRS and brief description of provisions | n/a | ||||
D.3 | Transfer agent fees and charges | 170 | ||||
D.4 | Transfer agent payments | 170 | ||||
Item 13 |
Defaults, Dividend Arrearages and Delinquencies | |||||
A. | Defaults | 170 | ||||
B. | Dividend arrearages and delinquencies | 170 | ||||
Item 14 |
Material Modifications to the Rights of Security Holders and Use of Proceeds | n/a | ||||
Item 15 |
Controls and Procedures | 53 – 55, 79, 171 | ||||
Item 16 |
Reserved | |||||
A. | Audit Committee Financial Expert | 48, 54 | ||||
B. | Code of Ethics | 33, 53, 56 | ||||
C. | Principal Accountant Fees and Services | 54 – 55, 171 | ||||
D. | Exemptions From The Listing Standards For Audit Committees | n/a | ||||
E. | Purchases Of Equity Securities By The Issuer and Affiliated Purchasers | 51, 171 | ||||
F. | Change in Registrant’s Certifying Accountant | n/a | ||||
G. | Corporate Governance | 53 | ||||
H. | Mine Safety Disclosures | n/a | ||||
Item 17 |
Financial Statements | 78 – 79, 87 – 142, 173 – 178 | ||||
Item 18 |
Financial Statements | 78 – 79, 87 – 142, 173 – 178 |
Item 19 Exhibits |
Please refer to the Exhibit list located immediately following the signature page for this document as filed with the SEC. |
164 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Directors, senior management and employees
Employees
The average number of employees for the last three years is provided in note 4A on page 97. The average number of employees during 2019 included 9,327 seasonal workers. We believe our relationship with our employees and any labour unions of which they may be part is satisfactory in all material respects.
Global employee share plans (shares)
In November 2014, Unilever’s global employee plan ‘SHARES’ was launched in 17 countries. SHARES gives eligible Unilever employees below management level the opportunity to invest between €10 and €200 per month from their net salary in Unilever shares. For every three shares our employees buy (Investment Shares), Unilever will give them one free Matching Share, which will vest if employees hold their Investment Shares for at least three years. The Matching Shares are not subject to any performance conditions. In 2015, SHARES was rolled out globally and is now offered in more than 100 countries. Executive Directors are not eligible to participate in SHARES. As of 20 February 2020, awards for 257,156 NV and 209,321 PLC shares were outstanding under SHARES.
North American share plans
Unilever also maintains share plans for its North American employees that are governed by an umbrella plan referred to as the Unilever North America Omnibus Equity Compensation Plan. These plans are the North American equivalents of the Unilever Share Plan 2017 and the GSIP, MCIP and SHARES plans. The rules governing these share plans are materially the same as the rules governing the Unilever Share Plan 2017, GSIP, MCIP and SHARES plans, respectively. However, the plans contain non-competition and non-solicitation covenants and they are subject to US and Canadian employment and tax laws. The plans are administered by the North America Compensation Committee of Unilever United States Inc. and they are governed by New York law.
The foregoing description of the Unilever North America Omnibus Equity Compensation Plan does not purport to be complete and is qualified in its entirety by reference to the Unilever North America Omnibus Equity Compensation Plan, including all amendments thereto, filed as Exhibit 99.1 to the Form S-8 (File No. 333-185299) filed with the SEC on 6 December 2012, which is incorporated herein by reference.
Compensation committee
The Committee is concerned with the remuneration of the Executive and Non-Executive Directors and the tier of management directly below the Boards. It also has responsibility for the cash and executive and all employee share-based incentive plans, the Remuneration Policy and performance evaluation of the Unilever Leadership Executive.
Directors and senior management
Family relationship
There are no family relationships between any of our Executive Directors, members of the ULE or Non-Executive Directors.
Other arrangements
None of our Non-Executive Directors, Executive Directors or other key management personnel are elected or appointed under any arrangement or understanding with any major shareholder, customer, supplier or others.
Annual Report on Form 20-F 2019 | 165 |
Additional information for US listing purposes continued
Major shareholders and related party transactions
Major shareholders
The voting rights of the significant shareholders of NV and PLC are the same as for other holders of the class of share held by such significant shareholder.
The principal trading markets upon which Unilever shares are listed are Euronext Amsterdam for NV ordinary shares and the London Stock Exchange for PLC ordinary shares.
In the United States, NV New York Registry Shares and PLC American Depositary Receipts are traded on the New York Stock Exchange. Deutsche Bank Trust Company Americas (Deutsche Bank) acts for NV and PLC as issuer, transfer agent and, in respect of the PLC American Depositary Receipts, depositary.
At 20 February 2020 (the latest practicable date for inclusion in this report), there were 3,994 registered holders of NV New York Registry Shares and 791 registered holders of PLC American Depositary Receipts in the United States. We estimate that approximately 13% of NV’s ordinary shares (including shares underlying NV New York Registry shares) were held in the United States (approximately 10% in 2018) and approximately 11% of PLC’s ordinary shares (including shares underlying PLC American Depositary Receipts) were held in the United States (approximately 11% in 2018).
NV and PLC are separate companies with separate stock exchange listings and different shareholders. Shareholders cannot convert or exchange the shares of one for shares of the other and the relative share prices on the various markets can, and do, fluctuate. Each NV ordinary share represents the same underlying economic interest in the Unilever Group as each PLC ordinary share (save for exchange rate fluctuations).
If you are a shareholder of NV, you have an interest in a Dutch legal entity, your dividends will be paid in euros (converted into US dollars if you have shares registered in the United States) and you may be subject to tax in the Netherlands. If you are a shareholder of PLC, your interest is in a UK legal entity, your dividends will be paid in sterling (converted into US dollars if you have American Depositary Receipts) and you may be subject to UK tax. Nevertheless, the Equalisation Agreement means that as a shareholder of either company you effectively have an interest in the whole of Unilever. On a going concern basis, you have largely equal rights over our combined net profit and capital reserves as shown in the consolidated accounts.
To Unilever’s knowledge, the Unilever Group is not owned or controlled, directly or indirectly, by another corporation, any foreign government or by any other legal or natural person, severally or jointly. The Group is not aware of any arrangements the operation of which may at any subsequent date result in a change of control of Unilever.
Related party transactions
Transactions with related parties are conducted in accordance with agreed transfer pricing policies and include sales to joint ventures and associates. Other than those disclosed in notes 23 to the consolidated financial statements (and incorporated herein as above), there were no related party transactions that were material to the Group or to the related parties concerned that are required to be reported in 2019 up to 20 February 2020 (the latest practicable date for inclusion in this report).
Dividend record
The following tables show the dividends declared and dividends paid by NV and PLC for the last five years, expressed in terms of the revised share denominations which became effective from 22 May 2006. Differences between the amounts ultimately received by US holders of NV and PLC shares are the result of changes in exchange rates between the equalisation of the dividends and the date of payment.
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Dividends declared for the year |
||||||||||||||||||||
NV dividends |
||||||||||||||||||||
Dividend per €0.16 |
€1.64 | €1.55 | €1.43 | €1.28 | €1.21 | |||||||||||||||
Dividend per €0.16 (US Registry) |
$1.83 | $1.82 | $1.66 | $1.42 | $1.32 | |||||||||||||||
PLC dividends |
||||||||||||||||||||
Dividend per 31/9p |
£1.43 | £1.35 | £1.26 | €1.09 | £0.88 | |||||||||||||||
Dividend per 31/9p (US Registry) |
$1.83 | $1.82 | $1.66 | $1.42 | $1.32 | |||||||||||||||
Dividends paid during the year |
||||||||||||||||||||
NV dividends |
||||||||||||||||||||
Dividend per €0.16 |
€1.62 | €1.52 | €1.40 | €1.26 | €1.19 | |||||||||||||||
Dividend per €0.16 (US Registry) |
$1.82 | $1.83 | $1.56 | $1.40 | $1.32 | |||||||||||||||
PLC dividends |
||||||||||||||||||||
Dividend per 31/9p |
£1.42 | £1.33 | £1.22 | €1.04 | £0.87 | |||||||||||||||
Dividend per 31/9p (US Registry) |
$1.82 | $1.83 | $1.56 | $1.40 | $1.32 |
166 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Annual Report on Form 20-F 2019 | 167 |
Additional information for US listing purposes continued
168 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
Annual Report on Form 20-F 2019 | 169 |
Additional information for US listing purposes continued
170 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Purchases of equity securities
Share purchases during 2019
Please also refer to ‘Our shares’ section on page 51.
Total number of shares purchased |
Average price paid per share (€) |
Of which, number of shares purchased as part of publicly announced plans |
€ million Maximum value that may yet be purchased as part of publicly announced plans |
|||||||||||||
January |
||||||||||||||||
February |
||||||||||||||||
March |
||||||||||||||||
April(a) |
1,771,099 | 53.50 | ||||||||||||||
May(a) |
1,982,901 | 53.52 | ||||||||||||||
June |
||||||||||||||||
July |
||||||||||||||||
August |
||||||||||||||||
September |
||||||||||||||||
October |
||||||||||||||||
November |
||||||||||||||||
December |
||||||||||||||||
Total |
3,754,000 |
(a) | 3,754,000 shares were purchased to enable the Group to meet share award obligations under its Management Co-Investment Plan as part of the programme announced on 29 April 2019. The programme was completed on 13 May 2019. See note 4C on pages 103 to 104 for more details on share-based compensation plans. |
Between 31 December 2019 and 20 February 2020 (the latest practicable date for inclusion in this report) neither NV or PLC conducted any share repurchases.
Management’s report on internal control over financial reporting
In accordance with the requirements of Section 404 of the US Sarbanes-Oxley Act of 2002, the following report is provided by management in respect of the Group’s internal control over financial reporting (as defined in rule 13a–15(f) or rule 15d–15(f) under the US Securities Exchange Act of 1934):
• | Unilever’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Group; |
• | Unilever’s management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework (2013) to evaluate the effectiveness of our internal control over financial reporting. Management believes that the COSO framework (2013) is a suitable framework for its evaluation of our internal control over financial reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting; |
• | Management has assessed the effectiveness of internal control over financial reporting as of 31 December 2019, and has concluded that such internal control over financial reporting is effective. Management’s assessment and conclusion excludes Astrix, Lenor Japan and FruFru from this assessment, as they were acquired on 30 August 2019, 1 October 2019, and 1 October 2019 respectively. These entities are included in our 2019 consolidated financial statements, and together they constituted approximately 0.25% of our total assets as at 31 December 2019 and approximately 0.03% of total turnover for the year ended 31 December 2019; and |
• | KPMG LLP and KPMG Accountants N.V., who have audited the consolidated financial statements of the Group for the year ended 31 December 2019, have also audited the effectiveness of internal control over financial reporting as at 31 December 2019 and have issued an attestation report on internal control over financial reporting. |
Principal accountant fees and services
€ million 2019 |
€ million 2018 |
€ million 2017 |
||||||||||
Audit fees(a) |
17 | 16 | 14 | |||||||||
Audit-related fees(b) |
– | (d) | 5 | (d) | 5 | (d) | ||||||
Tax fees |
– | (c) | – | (c) | – | (c) | ||||||
All other fees |
– | (c) | – | (c) | – | (c) |
(a) | Amount payable to KPMG in respect of services supplied to associated pension schemes was less than €1 million individually and in aggregate (2018: less than €1 million individually and in aggregate; 2017: less than €1 million individually and in aggregate). |
(b) | Includes other audit services which comprise audit and similar work that regulations or agreements with third parties require the auditors to undertake. |
(c) | Amounts paid in relation to each type of service are individually less than €1 million. In aggregate the fees paid were less than €1 million (2018: less than €1 million, 2017: €1 million). |
(d) | 2018 includes €4 million (2017: €5 million) for audits and reviews of carve-out financial statements of the Spreads business and €1 million (2017: €Nil) for assurance work on Simplification. |
Annual Report on Form 20-F 2019 | 171 |
Additional information for US listing purposes continued
Selected financial data
The schedules below provide the Group’s selected financial data for the five most recent financial years.
2016 and 2015 numbers are not comparable as the Group has adopted IFRS 16 and has restated only 2018 and 2017. See note 24 to the consolidated financial statements on pages 138 to 140 for explanation and reconciliation of lines and sub-totals impacted by IFRS 16 adoption to those previously reported.
€ million | € million | € million | € million | € million | ||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Consolidated income statement | (Restated) | (a) | (Restated) | (a) | ||||||||||||||||
Turnover |
51,980 | 50,982 | 53,715 | 52,713 | 53,272 | |||||||||||||||
Operating profit |
8,708 | 12,639 | 8,957 | 7,801 | 7,515 | |||||||||||||||
Net finance costs |
(627 | ) | (608 | ) | (1,004 | ) | (563 | ) | (493 | ) | ||||||||||
Net monetary gain arising from hyperinflationary economies |
32 | 122 | – | – | – | |||||||||||||||
Share of net profit/(loss) of joint ventures and associates and other income/(loss) from non-current investments |
176 | 207 | 173 | 231 | 198 | |||||||||||||||
Profit before taxation |
8,289 | 12,360 | 8,126 | 7,469 | 7,220 | |||||||||||||||
Taxation |
(2,263 | ) | (2,572 | ) | (1,670 | ) | (1,922 | ) | (1,961 | ) | ||||||||||
Net profit |
6,026 | 9,788 | 6,456 | 5,547 | 5,259 | |||||||||||||||
Attributable to: |
||||||||||||||||||||
Non-controlling interests |
401 | 419 | 433 | 363 | 350 | |||||||||||||||
Shareholders’ equity |
5,625 | 9,369 | 6,023 | 5,184 | 4,909 | |||||||||||||||
€ million | € million | € million | € million | € million | ||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Combined earnings per share(a) | (Restated) | (a) | (Restated) | (a) | ||||||||||||||||
Basic earnings per share |
2.15 | 3.49 | 2.15 | 1.83 | 1.73 | |||||||||||||||
Diluted earnings per share |
2.14 | 3.48 | 2.14 | 1.82 | 1.72 | |||||||||||||||
For the basis of the calculations of combined earnings per share see note 7 ‘Combined earnings per share’ on page 107. |
| |||||||||||||||||||
€ million | € million | € million | € million | € million | ||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Consolidated balance sheet | (Restated) | (a) | (Restated) | (a) | ||||||||||||||||
Non-current assets |
48,376 | 45,633 | 45,078 | 42,545 | 39,612 | |||||||||||||||
Current assets |
16,430 | 15,478 | 16,980 | 13,884 | 12,686 | |||||||||||||||
Total assets |
64,806 | 61,111 | 62,058 | 56,429 | 52,298 | |||||||||||||||
Current liabilities |
20,978 | 20,150 | 23,587 | 20,556 | 20,019 | |||||||||||||||
Non-current liabilities |
29,942 | 28,844 | 24,273 | 18,893 | 16,197 | |||||||||||||||
Total liabilities |
50,920 | 48,994 | 47,860 | 39,449 | 36,216 | |||||||||||||||
Share Capital |
420 | 464 | 484 | 484 | 484 | |||||||||||||||
Share premium account |
134 | 129 | 130 | 134 | 152 | |||||||||||||||
Other reserves |
(5,574 | ) | (15,218 | ) | (13,587 | ) | (7,443 | ) | (7,816 | ) | ||||||||||
Retained profit |
18,212 | 26,022 | 26,413 | 23,179 | 22,619 | |||||||||||||||
Non-controlling interests |
694 | 720 | 758 | 626 | 643 | |||||||||||||||
Total equity |
13,886 | 12,117 | 14,198 | 16,980 | 16,082 | |||||||||||||||
Total liabilities and equity |
64,806 | 61,111 | 62,058 | 56,429 | 52,298 | |||||||||||||||
€ million | € million | € million | € million | € million | ||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Consolidated cash flow statement | (Restated) | (a) | (Restated) | (a) | ||||||||||||||||
Net cash flow from operating activities |
8,109 | 7,318 | 7,879 | 7,047 | 7,330 | |||||||||||||||
Net cash flow from/(used in) investing activities |
(2,237 | ) | 4,644 | (5,879 | ) | (3,188 | ) | (3,539 | ) | |||||||||||
Net cash flow from/(used in) financing activities |
(4,667 | ) | (12,113 | ) | (2,020 | ) | (3,073 | ) | (3,032 | ) | ||||||||||
Net increase/(decrease) in cash and cash equivalents |
1205 | (151 | ) | (20 | ) | 786 | 759 | |||||||||||||
Cash and cash equivalents at the beginning of the year |
3,090 | 3,169 | 3,198 | 2,128 | 1,910 | |||||||||||||||
Effect of foreign exchange rates |
(179 | ) | 72 | (9 | ) | 284 | (541 | ) | ||||||||||||
Cash and cash equivalents at the end of the year |
4,116 | 3,090 | 3,169 | 3,198 | 2,128 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 to the Group financial statements for further details. |
172 | Annual Report on Form 20-F 2019 |
Financial Statements |
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Ratios and other metrics | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Operating margin (%) (Restated)(a) |
16.8 | 24.6 | 16.5 | 14.8 | 14.1 | |||||||||||||||
Net profit margin (%) (Restated)(a) (b) |
10.8 | 18.4 | 11.3 | 9.8 | 9.2 | |||||||||||||||
Number of Shares issued |
||||||||||||||||||||
Unilever N.V. ordinary shares (Millions of units) |
1,461 | 1,715 | 1,715 | 1,715 | 1,715 | |||||||||||||||
Unilever N.V. special shares (units) |
2,400 | 2,400 | 2,400 | 2,400 | 2,400 | |||||||||||||||
Unilever PLC ordinary shares (Millions of units) |
1,169 | 1,187 | 1,310 | 1,310 | 1,310 | |||||||||||||||
Unilever PLC deferred stock (units) |
100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
(a) | Restated following adoption of IFRS 16. See note 1 and note 24 to the Group financial statements for further details. |
(b) | Net profit margin is expressed as net profit attributable to shareholders’ equity as a percentage of turnover. |
Guarantor statements (Audited)
On 27 July 2017, Unilever N.V. and Unilever Capital Corporation (UCC) filed a US Shelf registration, which is unconditionally and fully guaranteed, jointly and severally, by Unilever N.V., Unilever PLC and Unilever United States, Inc. (UNUS) and that superseded the NV and UCC US Shelf registration filed on 30 September 2014, which was unconditionally and fully guaranteed, jointly and severally, by NV, PLC and UNUS. UCC and UNUS are each indirectly 100% owned by the Unilever parent entities (as defined below). Of the US Shelf registration, $12.35 billion of Notes were outstanding at 31 December 2019 (2018: $12.5 billion; 2017: $8.9 billion) with coupons ranging from 1.375% to 5.9%. These Notes are repayable between 5 May 2020 and 15 November 2032.
Provided below are the income statements, cash flow statements and balance sheets of each of the companies discussed above, together with the income statement, cash flow statement and balance sheet of non-guarantor subsidiaries. These have been prepared under the historical cost convention and, aside from the basis of accounting for investments at net asset value (equity accounting), comply in all material respects with International Financial Reporting Standards. The financial information in respect of NV, PLC and UNUS has been prepared with all subsidiaries accounted for on an equity basis. Information on NV and PLC is shown collectively as Unilever parent entities. The financial information in respect of the non-guarantor subsidiaries has been prepared on a consolidated basis.
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Income statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2019 | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Turnover(b) |
– | – | – | 51,980 | – | 51,980 | ||||||||||||||||||
Operating profit |
– | 1,148 | 1 | 7,559 | – | 8,708 | ||||||||||||||||||
Net finance income/(costs) |
2 | (89 | ) | (492 | ) | (18 | ) | – | (597 | ) | ||||||||||||||
Pensions and similar obligations |
– | (2 | ) | (22 | ) | (6 | ) | – | (30 | ) | ||||||||||||||
Other income/(losses) |
– | – | – | 176 | – | 176 | ||||||||||||||||||
Net monetary gain arising from hyperinflationary economies |
– | – | – | 32 | – | 32 | ||||||||||||||||||
Profit before taxation |
2 | 1,057 | (513 | ) | 7,743 | – | 8,289 | |||||||||||||||||
Taxation |
– | (169 | ) | – | (2,094 | ) | – | (2,263 | ) | |||||||||||||||
Net profit before subsidiaries |
2 | 888 | (513 | ) | 5,649 | – | 6,026 | |||||||||||||||||
Equity earnings of subsidiaries |
– | 4,737 | 1,193 | (7,026 | ) | 1,096 | – | |||||||||||||||||
Net profit |
2 | 5,625 | 680 | (1,377 | ) | 1,096 | 6,026 | |||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Non-controlling interests |
– | – | – | 401 | – | 401 | ||||||||||||||||||
Shareholders’ equity |
2 | 5,625 | 680 | (1,778 | ) | 1,096 | 5,625 | |||||||||||||||||
Other comprehensive income |
– | (5 | ) | 13 | 535 | – | 543 | |||||||||||||||||
Total comprehensive income |
2 | 5,620 | 693 | (842 | ) | 1,096 | 6,569 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | For the purpose of this table, amounts exclude revenue from Group companies. |
Annual Report on Form 20-F 2019 | 173 |
Additional information for US listing purposes continued
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Income statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2018(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Turnover(c) |
– | – | – | 50,982 | – | 50,982 | ||||||||||||||||||
Operating profit |
– | 1,987 | (4 | ) | 10,656 | – | 12,639 | |||||||||||||||||
Net finance income/(costs) |
– | (105 | ) | (426 | ) | (52 | ) | – | (583 | ) | ||||||||||||||
Pensions and similar obligations |
– | (2 | ) | (19 | ) | (4 | ) | – | (25 | ) | ||||||||||||||
Other income/(losses) |
– | – | – | 207 | – | 207 | ||||||||||||||||||
Premium paid on buyback of preference shares |
– | (382 | ) | – | 382 | – | – | |||||||||||||||||
Net monetary gain arising from hyperinflationary economies |
– | – | – | 122 | – | 122 | ||||||||||||||||||
Profit before taxation |
– | 1,498 | (449 | ) | 11,311 | – | 12,360 | |||||||||||||||||
Taxation |
– | (199 | ) | – | (2,373 | ) | – | (2,572 | ) | |||||||||||||||
Net profit before subsidiaries |
– | 1,299 | (449 | ) | 8,938 | – | 9,788 | |||||||||||||||||
Equity earnings of subsidiaries |
– | 8,070 | 1,787 | (20,326 | ) | 10,469 | – | |||||||||||||||||
Net profit |
– | 9,369 | 1,338 | (11,388 | ) | 10,469 | 9,788 | |||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Non-controlling interests |
– | – | – | 419 | – | 419 | ||||||||||||||||||
Shareholders’ equity |
– | 9,369 | 1,338 | (11,807 | ) | 10,469 | 9,369 | |||||||||||||||||
Other comprehensive income |
– | (24 | ) | 25 | (1,172 | ) | – | (1,171 | ) | |||||||||||||||
Total comprehensive income |
– | 9,345 | 1,363 | (12,560 | ) | 10,469 | 8,617 | |||||||||||||||||
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Income statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2017(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Turnover(c) |
– | – | – | 53,715 | – | 53,715 | ||||||||||||||||||
Operating profit |
– | 999 | (4 | ) | 7,962 | – | 8,957 | |||||||||||||||||
Net finance income/(costs) |
1 | (110 | ) | (379 | ) | (38 | ) | – | (526 | ) | ||||||||||||||
Pensions and similar obligations |
– | (2 | ) | (24 | ) | (70 | ) | – | (96 | ) | ||||||||||||||
Other income/(losses) |
– | – | – | 173 | – | 173 | ||||||||||||||||||
Premium paid on buyback of preference shares |
– | – | – | (382 | ) | – | (382 | ) | ||||||||||||||||
Profit before taxation |
1 | 887 | (407 | ) | 7,645 | – | 8,126 | |||||||||||||||||
Taxation |
– | (165 | ) | – | (1,505 | ) | – | (1,670 | ) | |||||||||||||||
Net profit before subsidiaries |
1 | 722 | (407 | ) | 6,140 | – | 6,456 | |||||||||||||||||
Equity earnings of subsidiaries |
– | 5,301 | 1,716 | (10,298 | ) | 3,281 | – | |||||||||||||||||
Net profit |
1 | 6,023 | 1,309 | (4,158 | ) | 3,281 | 6,456 | |||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Non-controlling interests |
– | – | – | 433 | – | 433 | ||||||||||||||||||
Shareholders’ equity |
1 | 6,023 | 1,309 | (4,591 | ) | 3,281 | 6,023 | |||||||||||||||||
Other comprehensive income |
– | (75 | ) | (156 | ) | 503 | – | 272 | ||||||||||||||||
Total comprehensive income |
1 | 5,948 | 1,153 | (3,655 | ) | 3,281 | 6,728 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
(c) | For the purpose of these tables, amounts exclude revenue from Group companies. |
174 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Balance sheet | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
at 31 December 2019 | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Assets |
||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Goodwill and intangible assets |
– | 3,141 | – | 27,888 | – | 31,029 | ||||||||||||||||||
Deferred tax assets |
– | – | – | 1,336 | – | 1,336 | ||||||||||||||||||
Other non-current assets |
– | 2 | 1 | 16,008 | – | 16,011 | ||||||||||||||||||
Amounts due from group companies |
15,335 | 10,602 | – | – | (25,937 | ) | – | |||||||||||||||||
Net assets of subsidiaries (equity accounted) |
– | 21,193 | 24,514 | – | (45,707 | ) | – | |||||||||||||||||
15,335 | 34,938 | 24,515 | 45,232 | (71,644 | ) | 48,376 | ||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Amounts due from group companies |
– | 15,257 | 822 | 28,799 | (44,878 | ) | – | |||||||||||||||||
Trade and other current receivables |
– | 153 | 7 | 6,535 | – | 6,695 | ||||||||||||||||||
Current tax assets |
– | 18 | – | 379 | – | 397 | ||||||||||||||||||
Other current assets |
81 | – | – | 9,257 | – | 9,338 | ||||||||||||||||||
81 | 15,428 | 829 | 44,970 | (44,878 | ) | 16,430 | ||||||||||||||||||
Total assets |
15,416 | 50,366 | 25,344 | 90,202 | (116,522 | ) | 64,806 | |||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Financial liabilities |
2,435 | 1,049 | – | 1,207 | – | 4,691 | ||||||||||||||||||
Amounts due to group companies |
2,775 | 24,469 | 1,555 | 16,079 | (44,878 | ) | – | |||||||||||||||||
Trade payables and other current liabilities |
89 | 356 | 16 | 14,307 | – | 14,768 | ||||||||||||||||||
Current tax liabilities |
– | – | 9 | 889 | – | 898 | ||||||||||||||||||
Other current liabilities |
– | – | 5 | 616 | – | 621 | ||||||||||||||||||
5,299 | 25,874 | 1,585 | 33,098 | (44,878 | ) | 20,978 | ||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Financial liabilities |
9,789 | 11,009 | – | 2,768 | – | 23,566 | ||||||||||||||||||
Amounts due to group companies |
– | – | 11,325 | 14,612 | (25,937 | ) | – | |||||||||||||||||
Pensions and post-retirement healthcare liabilities: |
||||||||||||||||||||||||
Funded schemes in deficit |
– | 2 | 127 | 1,028 | – | 1,157 | ||||||||||||||||||
Unfunded schemes |
– | 83 | 376 | 1,002 | – | 1,461 | ||||||||||||||||||
Other non-current liabilities |
– | 325 | 6 | 3,427 | – | 3,758 | ||||||||||||||||||
9,789 | 11,419 | 11,834 | 22,837 | (25,937 | ) | 29,942 | ||||||||||||||||||
Total liabilities |
15,088 | 37,293 | 13,419 | 55,935 | (70,815 | ) | 50,920 | |||||||||||||||||
Shareholders’ equity |
328 | 13,073 | 11,925 | 33,573 | (45,707 | ) | 13,192 | |||||||||||||||||
Non-controlling interests |
– | – | – | 694 | – | 694 | ||||||||||||||||||
Total equity |
328 | 13,073 | 11,925 | 34,267 | (45,707 | ) | 13,886 | |||||||||||||||||
Total liabilities and equity |
15,416 | 50,366 | 25,344 | 90,202 | (116,522 | ) | 64,806 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Annual Report on Form 20-F 2019 | 175 |
Additional information for US listing purposes continued
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Balance sheet | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
at 31 December 2018(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Assets |
||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Goodwill and intangible assets |
– | 3,058 | – | 26,435 | – | 29,493 | ||||||||||||||||||
Deferred tax assets |
– | – | 13 | 1,139 | – | 1,152 | ||||||||||||||||||
Other non-current assets |
– | 43 | 2 | 14,943 | – | 14,988 | ||||||||||||||||||
Amounts due from group companies |
17,211 | 10,379 | – | – | (27,590 | ) | – | |||||||||||||||||
Net assets of subsidiaries (equity accounted) |
– | 22,125 | 22,427 | – | (44,552 | ) | – | |||||||||||||||||
17,211 | 35,605 | 22,442 | 42,517 | (72,142 | ) | 45,633 | ||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Amounts due from group companies |
– | 11,883 | 5,413 | 33,032 | (50,328 | ) | – | |||||||||||||||||
Trade and other current receivables |
– | 156 | 4 | 6,322 | – | 6,482 | ||||||||||||||||||
Current tax assets |
– | 15 | – | 457 | – | 472 | ||||||||||||||||||
Other current assets |
6 | 7 | – | 8,511 | – | 8,524 | ||||||||||||||||||
6 | 12,061 | 5,417 | 48,322 | (50,328 | ) | 15,478 | ||||||||||||||||||
Total assets |
17,217 | 47,666 | 27,859 | 90,839 | (122,470 | ) | 61,111 | |||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Financial liabilities |
2,381 | 35 | 2 | 1,195 | – | 3,613 | ||||||||||||||||||
Amounts due to group companies |
4,895 | 25,010 | 3,127 | 17,296 | (50,328 | ) | – | |||||||||||||||||
Trade payables and other current liabilities |
96 | 327 | 15 | 14,019 | – | 14,457 | ||||||||||||||||||
Current tax liabilities |
– | – | 72 | 1,373 | – | 1,445 | ||||||||||||||||||
Other current liabilities |
– | 2 | – | 633 | – | 635 | ||||||||||||||||||
7,372 | 25,374 | 3,216 | 34,516 | (50,328 | ) | 20,150 | ||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Financial liabilities |
9,525 | 10,787 | – | 2,813 | – | 23,125 | ||||||||||||||||||
Amounts due to group companies |
– | – | 13,290 | 14,300 | (27,590 | ) | – | |||||||||||||||||
Pensions and post-retirement healthcare liabilities: |
||||||||||||||||||||||||
Funded schemes in deficit |
– | 7 | 136 | 1,066 | – | 1,209 | ||||||||||||||||||
Unfunded schemes |
– | 87 | 388 | 918 | – | 1,393 | ||||||||||||||||||
Other non-current liabilities |
– | 141 | 1 | 2,975 | – | 3,117 | ||||||||||||||||||
9,525 | 11,022 | 13,815 | 22,072 | (27,590 | ) | 28,844 | ||||||||||||||||||
Total liabilities |
16,897 | 36,396 | 17,031 | 56,588 | (77,918 | ) | 48,994 | |||||||||||||||||
Shareholders’ equity |
320 | 11,270 | 10,828 | 33,531 | (44,552 | ) | 11,397 | |||||||||||||||||
Non-controlling interests |
– | – | – | 720 | – | 720 | ||||||||||||||||||
Total equity |
320 | 11,270 | 10,828 | 34,251 | (44,552 | ) | 12,117 | |||||||||||||||||
Total liabilities and equity |
17,217 | 47,666 | 27,859 | 90,839 | (122,470 | ) | 61,111 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
176 | Annual Report on Form 20-F 2019 |
Financial Statements |
![]() |
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Balance sheet | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
at 1 January 2018(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Assets |
||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Goodwill and intangible assets |
– | 2,143 | – | 26,258 | – | 28,401 | ||||||||||||||||||
Deferred tax assets |
– | 90 | 57 | 971 | – | 1,118 | ||||||||||||||||||
Other non-current assets |
– | 33 | 2 | 15,524 | – | 15,559 | ||||||||||||||||||
Amounts due from group companies |
17,132 | 7,099 | – | – | (24,231 | ) | – | |||||||||||||||||
Net assets of subsidiaries (equity accounted) |
– | 35,744 | 21,532 | – | (57,276 | ) | – | |||||||||||||||||
17,132 | 45,109 | 21,591 | 42,753 | (81,507 | ) | 45,078 | ||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Amounts due from group companies |
– | 6,119 | 5,318 | 32,445 | (43,882 | ) | – | |||||||||||||||||
Trade and other current receivables |
– | 51 | 3 | 5,165 | – | 5,219 | ||||||||||||||||||
Current tax assets |
– | 57 | 9 | 422 | – | 488 | ||||||||||||||||||
Other current assets |
– | 39 | – | 11,234 | – | 11,273 | ||||||||||||||||||
– | 6,266 | 5,330 | 49,266 | (43,882 | ) | 16,980 | ||||||||||||||||||
Total assets |
17,132 | 51,375 | 26,921 | 92,019 | (125,389 | ) | 62,058 | |||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Financial liabilities |
2,420 | 4,690 | 1 | 1,267 | – | 8,378 | ||||||||||||||||||
Amounts due to group companies |
6,964 | 25,457 | 24 | 11,437 | (43,882 | ) | – | |||||||||||||||||
Trade payables and other current liabilities |
65 | 215 | 11 | 13,135 | – | 13,426 | ||||||||||||||||||
Current tax liabilities |
– | – | – | 1,088 | – | 1,088 | ||||||||||||||||||
Other current liabilities |
– | 5 | – | 690 | – | 695 | ||||||||||||||||||
9,449 | 30,367 | 36 | 27,617 | (43,882 | ) | 23,587 | ||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Financial liabilities |
7,377 | 7,594 | – | 3,068 | – | 18,039 | ||||||||||||||||||
Amounts due to group companies |
– | – | 14,517 | 9,714 | (24,231 | ) | – | |||||||||||||||||
Pensions and post-retirement healthcare liabilities: |
||||||||||||||||||||||||
Funded schemes in deficit |
– | 8 | 103 | 1,114 | – | 1,225 | ||||||||||||||||||
Unfunded schemes |
– | 93 | 439 | 977 | – | 1,509 | ||||||||||||||||||
Other non-current liabilities |
– | 5 | 1 | 3,494 | – | 3,500 | ||||||||||||||||||
7,377 | 7,700 | 15,060 | 18,367 | (24,231 | ) | 24,273 | ||||||||||||||||||
Total liabilities |
16,826 | 38,067 | 15,096 | 45,984 | (68,113 | ) | 47,860 | |||||||||||||||||
Shareholders’ equity |
306 | 13,308 | 11,825 | 45,277 | (57,276 | ) | 13,440 | |||||||||||||||||
Non-controlling interests |
– | – | – | 758 | – | 758 | ||||||||||||||||||
Total equity |
306 | 13,308 | 11,825 | 46,035 | (57,276 | ) | 14,198 | |||||||||||||||||
Total liabilities and equity |
17,132 | 51,375 | 26,921 | 92,019 | (125,389 | ) | 62,058 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
Annual Report on Form 20-F 2019 | 177 |
Additional information for US listing purposes continued
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Cash flow statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2019 | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Net cash flow from/(used in) operating activities |
1 | 1,127 | (21 | ) | 7,002 | – | 8,109 | |||||||||||||||||
Net cash flow from/(used in) investing activities |
2,681 | (1,887 | ) | 4,378 | (4,720 | ) | (2,689 | ) | (2,237 | ) | ||||||||||||||
Net cash flow from/(used in) financing activities |
(2,613 | ) | 768 | (4,357 | ) | (1,154 | ) | 2,689 | (4,667 | ) | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents |
69 | 8 | – | 1,128 | – | 1,205 | ||||||||||||||||||
Cash and cash equivalents at beginning of year |
6 | 7 | (1 | ) | 3,078 | – | 3,090 | |||||||||||||||||
Effect of foreign exchange rates |
5 | (15 | ) | – | (169 | ) | – | (179 | ) | |||||||||||||||
Cash and cash equivalents at end of year |
80 | – | (1 | ) | 4,037 | – | 4,116 | |||||||||||||||||
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Cash flow statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2018(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Net cash flow from/(used in) operating activities |
– | 952 | (6 | ) | 6,372 | – | 7,318 | |||||||||||||||||
Net cash flow from/(used in) investing activities |
1,088 | 1,196 | (63 | ) | 4,619 | (2,196 | ) | 4,644 | ||||||||||||||||
Net cash flow from/(used in) financing activities |
(1,097 | ) | (2,190 | ) | 69 | (11,091 | ) | 2,196 | (12,113 | ) | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents |
(9 | ) | (42 | ) | – | (100 | ) | – | (151 | ) | ||||||||||||||
Cash and cash equivalents at beginning of year |
– | 23 | (1 | ) | 3,147 | – | 3,169 | |||||||||||||||||
Effect of foreign exchange rates |
15 | 26 | – | 31 | – | 72 | ||||||||||||||||||
Cash and cash equivalents at end of year |
6 | 7 | (1 | ) | 3,078 | – | 3,090 | |||||||||||||||||
€ million | € million | € million | € million | € million | € million | |||||||||||||||||||
Unilever | Unilever | |||||||||||||||||||||||
Capital | United | |||||||||||||||||||||||
Corporation | Unilever | States Inc. | Non- | |||||||||||||||||||||
Cash flow statement | subsidiary | parent | subsidiary | guarantor | Unilever | |||||||||||||||||||
for the year ended 31 December 2017(b) | issuer | entities | (a) | guarantor | subsidiaries | Eliminations | Group | |||||||||||||||||
Net cash flow from/(used in) operating activities |
– | 948 | (40 | ) | 6,971 | – | 7,879 | |||||||||||||||||
Net cash flow from/(used in) investing activities |
(3,884 | ) | (7,123 | ) | (1,062 | ) | 5,136 | 1,054 | (5,879 | ) | ||||||||||||||
Net cash flow from/(used in) financing activities |
3,873 | 6,254 | 1,103 | (12,196 | ) | (1,054 | ) | (2,020 | ) | |||||||||||||||
Net increase/(decrease) in cash and cash equivalents |
(11 | ) | 79 | 1 | (89 | ) | – | (20 | ) | |||||||||||||||
Cash and cash equivalents at beginning of year |
– | 5 | (2 | ) | 3,195 | – | 3,198 | |||||||||||||||||
Effect of foreign exchange rates |
11 | (61 | ) | – | 41 | – | (9 | ) | ||||||||||||||||
Cash and cash equivalents at end of year |
– | 23 | (1 | ) | 3,147 | – | 3,169 |
(a) | The term ‘Unilever parent entities’ includes Unilever N.V. and Unilever PLC. Though Unilever N.V. and Unilever PLC are separate legal entities, with different shareholder constituencies and separate stock exchange listings, they operate as nearly as practicable as a single economic entity. Debt securities issued by entities in the Unilever Group are fully and unconditionally guaranteed by both Unilever N.V. and Unilever PLC. |
(b) | Restated following adoption of IFRS 16. See note 1 and note 24 for further details. |
178 | Annual Report on Form 20-F 2019 |
Cautionary Statement
This document 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.
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 Unilever Annual Report and Accounts 2019.
This document is not prepared in accordance with US GAAP and should not therefore be relied upon by readers as such.
In addition, a printed copy of the Annual Report on Form 20-F 2019 is available, free of charge, upon request to Unilever, Investor Relations Department, 100 Victoria Embankment, London EC4Y 0DY, United Kingdom.
This document comprises regulated information within the meaning of Sections 1:1 and 5:25c of the Act on Financial Supervision (‘Wet op het financieel toezicht (Wft)’) in the Netherlands.
The brand names shown in this report are trademarks owned by or licensed to companies within the Group.
References in this document to information on websites (and/or social media sites) are included as an aid to their location and such information is not incorporated in, and does not form part of, the Annual Report on Form 20-F 2019.
Designed and produced by Unilever Communications.
Printed at Pureprint Group, ISO 14001. FSC® certified and CarbonNeutral®.
This document is printed on Revive 100% Recycled Silk. These papers have been exclusively supplied by Denmaur Independent Papers which has offset the carbon produced by the production and delivery of them to the printer.
These papers are 100% recycled and manufactured using de-inked post-consumer waste. All the pulp is bleached using an elemental chlorine free process (ECF). Printed in the UK by Pureprint using its pureprint® environmental printing technology. Vegetable inks were used throughout. Pureprint is a CarbonNeutral® company. Both the manufacturing mill and the printer are registered to the Environmental Management System ISO 14001 and are Forest Stewardship Council® (FSC®) chain-of-custody certified.
If you have finished with this document and no longer wish to retain it, please pass it on to other interested readers or dispose of it in your recycled paper waste. Thank you. |
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Unilever N.V. | Unilever PLC | |||||
Head Office and Registered Office | Head Office | |||||
Weena 455, PO Box 760 | 100 Victoria Embankment | |||||
3000 DK Rotterdam | London EC4Y 0DY | |||||
The Netherlands | United Kingdom | |||||
T +31 (0)10 217 4000 | T +44 (0)20 7822 5252 | |||||
Commercial Register | Registered Office | |||||
Number: 24051830 | Unilever PLC | |||||
Port Sunlight | ||||||
Wirral | ||||||
Merseyside CH62 4ZD | ||||||
United Kingdom | ||||||
Registered in England and Wales | ||||||
Company Number: 41424 |
UNILEVER PLC — 20-F EXHIBIT LIST
Certain instruments which define rights of holders of long-term debt of the Company and its subsidiaries are not being filed because the total amount of securities authorized under each such instrument does not exceed 10% of the total consolidated assets of the Company and its subsidiaries. The Company and its subsidiaries hereby agree to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.
1 | Incorporated by reference to Exhibit 1.1 of Form 20-F (File No: 001-04546) filed with the SEC on March 08, 2013. |
2 | Incorporated by reference to Exhibit 2.2 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002. |
3 | Incorporated by reference to Exhibit 2.2 on Form 20 -F (File no 001-04546) filed with the SEC on 28 February 2017 |
4 | Incorporated by reference to Exhibit 2.3 of Form 20-F (File No: 333-196985) filed with the SEC on March 6, 2015. |
5 | Incorporated by reference to Exhibit 99(A) of Form F-6 (File No: 001-04546) filed with the SEC on June 24, 2014. |
6 | Incorporated by reference to Exhibit 4.1 of Form 20-F (File No: 001-04546) filed with the SEC on March 5, 2010. |
7 | Incorporated by reference to Exhibit 4.1(b) of Form 20-F (File No: 001-04546) filed with the SEC on March 6, 2015. |
8 | Incorporated by reference to Exhibit 4.1(c) of Form 20-F (File No: 001-04546) filed with the SEC on March 6, 2015. |
9 | Incorporated by reference to Exhibit 99.1 of Form S-8 (File No: 333-185299) filed with the SEC on December 6, 2012. |
10 | Incorporated by reference to Exhibit 4.5 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002. |
11 | Incorporated by reference to Exhibit 4.7 of Form 20-F (File No: 001-04546) filed with the SEC on March 28, 2002. |
12 | Incorporated by reference to Exhibit 4.7 of Form 20-F (File No: 001-04546) filed with the SEC on March 26, 2008. |
13 | Incorporated by reference to Exhibit 4.8 of Form 20-F (File No: 001-04546) filed with the SEC on March 4, 2011. |
14 | Incorporated by reference to Exhibit 4.9 of Form 20-F (File No: 001-04546) filed with the SEC on February 28, 2018. |
15 | The required information is set forth on pages 153 to 160 of the Annual Report on Form 20-F 2019. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this Annual Report on its behalf.
Unilever PLC.
(Registrant)
/s/ R.Sotamaa |
R. SOTAMAA, |
Chief Legal Officer and Group Secretary |
Date: 9 March 2020