There are plenty of reasons to be bullish on Unilever (ULVR): a portfolio of well-known brands, an active cost-cutting programme and newly-installed chief executive, Alan Jope. But the market's negative reaction to the consumer goods giant's 2018 results highlights the struggle to convince investors that the shares are worth shelling out for, particularly at their current valuation.
Despite calling it a “solid year” for the group, lower than expected sales growth in the final quarter of 2018 prompted Mr Jope to admit market conditions would “remain challenging” in 2019. Underlying sales growth for the current year is now also expected to be in the “lower half of [the] multi-year 3 to 5 per cent range”.
One can reasonably assume that any improvement in operating margins will be down to continued cost-cutting, rather than top-line acceleration. That said, strong free cash flow – which reached €5.0bn (2017: €5.4bn) last year – should continue to support the generous dividend.
Broker Liberum still expects underlying EPS of €2.56 for 2019, compared to €2.36 in 2018.
| UNILEVER (ULVR) | ||||
| ORD PRICE: | 3,918p | MARKET VALUE: | £114bn* | |
| TOUCH: | 3,918-3,919p | 12-MONTH HIGH: | 4,504p | LOW: 3,679p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 401¢** | NET DEBT: | 169% | |
| Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€bn) | Earnings per share (¢) | Dividend per share (p) |
| 2014 | 48.4 | 7.6 | 182 | 90.2 |
| 2015 | 53.3 | 7.2 | 173 | 88.5 |
| 2016 | 52.7 | 7.5 | 183 | 109 |
| 2017 | 53.7 | 8.2 | 216 | 126 |
| 2018 | 51.0 | 12.4 | 350 | 135 |
| % change | -5 | +52 | +62 | +8 |
| Ex-div: | 14 Feb† | |||
| Payment: | 20 Mar† | |||
| £1= €1.14.*Reflects combined value of Unilever NV and Unilever plc. **Includes intangible assets of £29.5bn or 1,022¢ a share †Applies to fourth quarter dividend only | ||||
