Investors told to resist takeover temptation as Unilever rallies
UNILEVER hailed a “substantial” stepup in first-half profits after slashing spending as it looks to convince investors to stick with its long-term plan following an attempted £100bn takeover by Kraft Heinz earlier this year.
The maker of Dove soap and Marmite said it had saved more than €1bn (£890m) in the first half of the year by reducing advertising agency fees by 17pc, and spending almost a quarter less on staff travel as employees were told to tighten their belts.
Unilever is planning to trim €6bn of savings by 2020 as it attempts to replicate the lean business model of its aggressive suitor, Kraft Heinz, and bolster its defences from activist investors, who have been targeting consumer goods giants, such as Nestle, and their sluggish growth.
The Anglo-dutch company reported a rise in underlying sales of 3pc in the first six months of the year, while profit before tax rose to €4.6bn from €3.6bn in the same period last year.
Paul Polman, chief executive, said the results were further proof of the “validity” of the FTSE 100 giant’s longterm plan for growth and independence. The Unilever boss highlighted that the company’s shares were now higher than the US maker of tomato ketchup and macaroni cheese had offered. Mr Polman has overseen an overhaul of the operation, including plans to sell its spreads business, since fending off the takeover threat from Kraft Heinz.
The Dutch chief said an auction was expected to start in the autumn following discussions with potential suitors, including private equity firms.
The Daily Telegraph has previously reported that Bain, CVC and Clayton, Dubilier & Rice had begun work on a £6bn offer, and Unilever could decide to sell the spread business, which includes Flora and Bertolli, in pieces.
Unilever is also analysing the future of its complicated dual-structure between London and Rotterdam.
Mr Polman said that a decision on the outcome would be made by the end of this year. He was at Number 10 yesterday as part of the Prime Minister’s first business council on Brexit.
Mr Polman said he wanted “quick answers on citizen rights and issues about Ireland, which means we can focus on the trade side of the debate and how to protect the economy and people in the UK”. “Increasingly people
‘Following the Kraft Heinz bid approach, Unilever’s redoubled efforts to raise margins are paying off’
are beginning to realise the tight timeline that business faces,” he said.
Unilever said that it was still on the hunt for “value accretive acquisitions” after losing out to US spice maker Mccormick in a bidding war for Reckitt Benckiser’s sauces business earlier this week.
“After coming under intense pressure following the Kraft Heinz bid approach, Unilever’s redoubled efforts to raise margins are paying off,” said Steve Clayton, fund manager of the HL Select funds. “Kraft Heinz may have gone away, but Unilever know they cannot relax and investors expect them to raise their game.”
Shares in Unilever rose 1.7pc to close at £43.89 yesterday.