The pressure was on Unilever (ULVR) to deliver a strong set of half-year results after it fended off a high-profile takeover attempt in February by Kraft Heinz (us:KHC), backed by the latter's shareholders Warren Buffett and Brazilian private equity firm 3G. The consumer goods giant rejected the cash-and-shares offer, which equated to $50 (£39) per share, arguing the 18 per cent premium to its share price at the time fundamentally undervalued the Anglo-Dutch company. Management then undertook a strategic review of its operations to find out how it can better deliver value to shareholders.
These numbers are an indication that Unilever is taking the job seriously. Chief executive Paul Polman said the transformation into a “more resilient, more competitive and more profitable business” is accelerating. The underlying operating margin improved by 180 basis points to 17.8 per cent, driven by a combination of innovation, cutting back on marketing, and a fall in overheads. Unilever now expects at least 100 basis points of margin expansion at the full year, an upgrade from the previous expectation of 80 basis points. The Connected 4 Growth' cost savings plan is also progressing faster than anticipated with more than €1bn (£0.89bn) of savings in the first half year. The programme aims to reach target savings of €6bn by 2020, delivering an underlying operating margin of 20 per cent.
Underlying sales grew 3 per cent ahead of markets with growth across all categories apart from the spreads business, which the company is planning to either sell or demerge as set out in the strategic review. Home and personal care continued to be the largest contributors to revenue at €16bn, while foods and refreshment accounted for the remaining €12bn. Unilever is also looking to grow through acquisitions. During the half year it bought US personal care business Hourglass, Latin American home and personal care business Quala, and entered into a joint venture with Europe and Asia Commercial Company Ltd to build its presence in Asia.
Analysts at Whitman Howard expect pre-tax profits of €8.3bn for the year to December giving an EPS of 199¢, compared with €7.5bn and 179¢ in 2016.
| UNILEVER (ULVR) | ||||
| ORD PRICE: | 4,338p | MARKET VALUE: | £131bn* | |
| TOUCH: | 4,336.5-4,338p | 12-MONTH HIGH: | 4,389.5p | LOW: 3,050.5p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 544¢** | NET DEBT: | 82% | |
| Half-year to 30 Jun | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (p) |
| 2016 | 26.3 | 3.64 | 88 | 52.50 |
| 2017 | 27.7 | 4.63 | 110 | 62.04 |
| % change | +5 | +27 | +25 | +18 |
| Ex-div: | 03 Aug | |||
| Payment: | 06 Sep | |||
| *Reflects combined share capital of Unilever NV and Unilever PLC **Includes €26.5bn of intangible assets or887¢ per share £1=€1.12 | ||||
