Unilever PLC

Thank you. Good morning and welcome to Unilever's full year results and strategic refresh. As in previous quarters, we're presenting to you from our respective homes, so hopefully technology will run smoothly again. We expect prepared remarks to be longer today at around 60 minutes, followed by around 30 minutes or so of Q&A. All of today's webcast is available live transcribed on the screen as part of our accessibility program. First, can I draw your attention to the disclaimer to forward-looking statements and non-GAAP measures? And with that, let me hand over to Alan.

Well, good morning, everybody, and welcome to our full year results update. As usual, Graham and I will take you through the results. As Richard said, this is going to be a slightly longer presentation than we customarily do because we'll also take the opportunity to share with you our strategy refresh. It's a good time to do so now that we've closed out 2020 and completed the unification of our legal structure. But first, back to 2020. Well, I think it's statingly obvious to say it was far from business as usual. Typically, we would start this presentation by sharing our underlying sales growth, underlying operating margin, earnings and cash. But in this year of incredible volatility and uncertainty, we prioritised three things. That was volume-led competitive growth. absolute profit and cash delivery. First and foremost, we said we would deliver competitive growth. We wanted to ensure more than ever growth ahead of our markets. So no matter whether some of our categories were enjoying super growth or were in decline, we wanted more than our fair share. And I'm very pleased that we are now decisively back to more than 50% of our business winning value share on a moving annual total basis. And actually over 60% of the business winning in the fourth quarter. with volume shares indicating over 70% gaining share. And this is a clear step change in our competitiveness from only a year ago. It demonstrates how Unilever's focus on operational rigor and excellence is working. We also focused on absolute profit and cash delivery. So underlying operating profit was 9.4 billion, up 0.7% at constant rates. And our free cash flow for the year was 7.7 billion. which is a record cash delivery up a full one and a half billion versus last year. Now, as Unilever watchers, you'll know that when we talk about operational excellence, we mean is our focus on these five growth fundamentals shared last January. And we'll spend more time on these later, but we are pleased how this framework has delivered that change in competitiveness that we're now seeing. At the same time, we've continued to drive forward our strategic agenda. We are the world's leader in sustainability business and have progressed our sustainability agenda during 2020 with initiatives that are more tightly linked than ever to our category and brand growth agendas. For example, our clean future agenda and home care or our future foods ambition. As you know well, we simplified our legal structure unifying under a single parent company. Unilever PLC. We're now a simpler business with better governance and greater strategic flexibility for portfolio change. And at the same time, we've continued to shape our portfolio towards high growth spaces through acquisitions in 2020, in particular in the functional nutrition space like Liquid IV and Smarty Pants, and of course, the completion of Horlicks earlier in the year. And we continue to work intensively on separating out the majority of our T portfolio from the rest of the business, and this is progressing well. We're working on various options for the business, including an IPO or a demerger, partnerships or a disposal. And as we said on our quarter three call, we are evaluating options for some of our smaller BPC brands as we continue to actively manage the portfolio. The brands in question are predominantly sold in Europe and or North America. At the moment, they're being transitioned to the leadership of a new management team in the company and that will give them dedicated focus to step up their growth and value creation. You might have seen a bit of speculation of this in recent days in the media and I want to be clear that no final decisions have been made about the long-term future of those brands. And with that, let me hand over to Graham for a more detailed take on our results. Graham.

Thanks, Alan. Good morning, everybody. Volume-led competitive growth with over 60% of our business winning value share translated into underlying sales growth of 3.5% in the fourth quarter. And that brings the full year at USG to 1.9%. Across our markets, the pandemic continued to cause volatility with restrictions, lockdowns and channel closures returning in many countries in the fourth quarter. While restrictions in other countries have been eased, we expect this volatility to continue into 2021 as governments balance opening economies to support livelihoods with public health protection. I'll touch on some specifics when we get to the regional updates. Now, as in previous quarters, we've broken down our portfolio into groupings that reflect changing consumer behaviours and channels during the pandemic. Across the year, we've seen huge swings in demand and many of those big trends have continued into the fourth quarter. While demand for hygiene products, that's skin cleansing and home and hygiene, remained well above pre-COVID levels, demand for hand sanitiser started to normalise in Q4 versus the exponential growth that we saw in the second quarter. With many consumers experiencing restricted living and lockdowns, our in-home food and refreshments business saw strong growth across the year and again grew double-digit in the fourth quarter. In contrast, our food solutions and out-of-home ice cream businesses declined significantly, and after a slight recovery following the easing of restrictions in Q3, many countries saw a resumption of channel closures during the fourth quarter. Turning to the divisions, beauty and personal care grew 1.2% in the full year with double digit growth in skin cleansing. We responded really quickly to changing consumer demands and launched hand sanitizers into over 60 markets. That helped to deliver strong and competitive growth. Lifebuoy, which is our latest billion euro brand, grew over 50% in the full year and the back of COVID-19 focused communications such as the hashtag fightbacteriaandviruses and the launch of our H is for Handwashing campaign to raise awareness of handwashing and hygiene with children. Dove, our biggest brand, grew mid-single digit, helped by innovations in the antibacterial segment, combining efficacy against germs with the unique care of Dove. Our prestige beauty business was impacted by door closures in the health and beauty channel, with countries going back into lockdown in the fourth quarter. Prestige e-commerce continued to perform really strongly, however, outperforming the market significantly, and over 50% of our prestige beauty sales are now through e-commerce. The rest of VPC declined as consumers stayed at home, meaning fewer usage occasions in categories such as hair care and deodorants. However, in markets where such restrictions have been eased, such as China, India and parts of Latin America, growth has returned. Our food and refreshment division grew 1.3% driven by price and had a strong finish to the year with underlying sales growth of 5.4%. Our retail foods business grew 12% as restricted living led to more in-home eating occasions for consumers with Knorr growing double digits and dressings performing well. We've launched Hellmann's for the first time in Germany and in India. In ice cream, we rapidly pivoted resources to more in-home consumption through innovations such as the Ben & Jerry's Netflix and chilled variant. And we've again doubled the size of our e-commerce ice cream now business. Strong in-home ice cream growth of 17% was offset by a decline of over 20% in the out-of-home business. Overall, ice cream sales were level year-on-year, which is a really great result in the face of such general volatility. Food solutions declined by 30% as restaurants and hospitality businesses were closed for much of the year. During the fourth quarter, the market continued to recover in China, with dining resuming in many places. However, conditions in developed markets worsened in the fourth quarter as countries went back to lockdown, driving a 25% decline in food solution sales. We expect to see similar conditions into the first quarter of 2021. Home care grew 4.5% in the full year, driven by volume. Pricing was marginally negative as we passed on lower commodity costs in the second half, mainly in fabric solutions. Home and hygiene grew high teens, with continued high demand for household cleaning products as both penetration and frequency of purchase increased significantly. Domestos grew over 25% as we introduced bleach-based spring innovations and launched Domestos into new markets like China. Laundry grew 1%. Fabric solutions was flat as the pandemic continued to impact washing occasions. In India, frequency of washing workwear and school wear decreased by about 10% as schools and offices were closed. Fabric sensations recovered well in the second half, led by China. E-commerce grew by 61% in the full year as we responded quickly to the rapid shift of consumer spending online. E-commerce now makes up 9% of Unilever's business. Econ growth was strong across all of our regions. In Brazil, we expanded our eB2B Compra Agora business, and in the U.S., we more than doubled the size of our e-com turnover. In China, of course, the most advanced e-com market globally, we grew by over 50%, taking online to more than one-third of our turnover in China. We also saw strong growth across all e-com channels. Omnichannel e-com grew around 100%, while PurePlay grew around 50%. EB2B also performed strongly, up 65%. Turning to the geographies, in Asia, Amit and Namit Rub, underlying sales grew 0.4% in the full year, driven by price. USG in the fourth quarter was 2.6% as India continued its post-lockdown recovery with good growth in beauty and personal care. However, Southeast Asia declined, mainly driven by the Philippines and Thailand where tough restrictions on movement and tourism remain in place. China returned to high single-digit growth in the second half as the economy opened up and a more normal life returned for Chinese consumers. The recovery we've seen in China has been encouraging and is ahead of the market. Turkey had a strong performance in a difficult environment with volume-led growth driven by home care and ice cream. While market conditions vary enormously between individual countries, We are winning competitively across our key markets of Asia Amit Rub. In Latin America, underlying sales grew 4.1% in the full year, driven by price. Once again, our performance has been competitive in a very choppy economic environment. Growth in Brazil was resilient, but slowed in the fourth quarter as government consumer subsidies reduced. Argentina impressively grew both volume and price, despite the reintroduction of living restrictions. Volumes declined significantly in the year in Mexico, Colombia and Ecuador due to restricted living, but as these eased in the fourth quarter, we saw this trend slow. North America had a strong growth year with USG of 7.7% driven by volume. Strong consumer demand for in-home foods and ice cream continued into the fourth quarter, while demand for home and hygiene products, especially hand sanitizers, settled down from the peaks seen in the second quarter. Full-year growth includes a negative impact of around 2.4% in North America from our food solutions and prestige beauty businesses, which were impacted by channel closures. Excluding this, underlying sales for our US retail business grew double-digit. Our competitiveness in North America remains lower than the company average, and we are focused on addressing this. We were therefore pleased to see our competitiveness improve sequentially with a particularly strong step up in Q4, and e-com, which is largely an untracked channel, grew by over 100% in the full year. So we enter 2021 with good momentum in North America. In Europe, underlying sales were down 1% in the year, driven by a continued deflationary environment. The UK and Germany grew strongly through demand for in-home food, ice cream and hygiene products. Italy and Spain, however, declined due to our large out-of-home ice cream presence in those countries. We delivered strong and improved competitiveness across the Europe region. Turnover for the full year was 50.7 billion euros, a decline of 2.4% driven by currency. Underlying sales growth was up by 1.9%. Acquisitions and disposals increased turnover by 1.2% as we completed the acquisition of the Horlicks and Boosts health food drinks brands from GSK. Currency movements versus the Euro reduced our turnover by 5.4%. Based on spot rates, we would expect a negative currency translation impact of around 4% on turnover for 2021 and a bit more on EPS. Underlying operating margin was 18.5%. down 60 basis points. This was driven by gross margin, which declined by 50 basis points due to COVID on costs, an adverse mix, as we flagged to you in our results updates during the year. COVID costs, such as factory hygiene protocols and temporary labor, reduced gross margin by 50 basis points, while our particular COVID-driven sales mix created a drag of a further 40 basis points on the gross margin. Looking forward, gross margin will continue to be impacted by COVID on cost in 2021, and we will begin to lap the adverse sales mix only from the second quarter. The margin impact of country, category and pack mix will be substantially determined by the progress of the pandemic and the related lockdowns. Brand and marketing investment increased by €160 million in the full year at constant exchange rates. After a 100 basis point conservation in spend over the first half through the initial lockdowns, we stepped up investment in BMI strongly in the second half behind brand campaigns and product innovation that had been tailored to be specific to the new environment. That includes more hygiene-based communication and in-home consumption opportunities. Examples of this are the Hellman's Stay Inspired campaigns. As a result, BMI spend was up by 100 basis points in half. Underlying earnings per share decreased 2.4% due to negative currency impact of 6.5%. Constant underlying earnings per share were up 4.1%. Operational performance contributed 0.5% to earnings, while lower finance costs had a positive impact of 1.9%, reflecting a lower cost of debt. a lower underlying effective tax rate of 23% compared with 25.5% in 2019 and contributed 3% to earnings growth. The decrease was primarily driven by tax settlements and the replacement of the Indian distribution tax with a dividend withholding tax. We expect our tax rate for 2021 to be around 25%. Minorities had a negative impact of 1.6% on EPS, due to higher minority interests in India following the Horlicks acquisition, which was of course part settled using equity in Hindustan Unilever. Alan mentioned that we focused the business in 2020 on delivering cash in an uncertain year, and this certainly helped us deliver a record free cash flow of 7.7 billion euros, an increase of 1.5 billion compared to 2019. This reflects favourable working capital movements as we significantly increased focus on receivables. At the same time, we re-phased our CapEx investment in light of COVID-19 and there was a reduction in cash tax paid, partly driven by tax on the disposal of spreads in the prior year. Our cash conversion was strong at 129% and our net debt is sitting at 1.8 times underlying EBITDA. Return on invested capital was 18%. This reflects higher goodwill and intangible assets from the Horlicks acquisition and lower underlying operating profit after tax. And with that, let me hand you back to Alan.