Strategic Corporate Finance of PLC Unilever

This report evaluates the business performance of PLC Unilever based on financial concepts such as financing strategy, corporate governance, capital structure, and merger & acquisition. It also discusses the efficient market hypothesis.

Running head: UGB363 STRATEGIC CORPORATE FINANCE
Strategic Corporate finance of PLC Unilever
Name of Student
Name of the University
Author Note

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Strategic Corporate finance of PLC Unilever
Executive Summary
The aim of this report is understand the business strategy of the PLC Unilever, Unilever is a
British-Dutch multinational consumer goods company with a headquartered in London. The
objective of the report is to measure the financial performance of the company based on the
certain financial & accounting concepts like financing strategy of the company, corporate
governance, capital structure, capital alteration policy, dividend policy and the company
merger & acquisition. The company has delivered a solid performance in the all the major
product segment, despite of the many challenges faced by the company, like various
geopolitical scenario,
In the second part of the report a detail discussion has been done on the Market efficient
hypothesis, which explain that different classes of assets prices of the product like bond,
security market are fully reflected on the market price. Further the different market efficiency
has been discussed which are necessary for the efficient market hypothesis.

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Strategic Corporate finance of PLC Unilever
Table of Contents
Part-A: Evaluating the Business performance of the PLC Unilever.........................................3
Introduction................................................................................................................................3
Company brief information....................................................................................................3
Evaluation of the business performance of Unilever Corporation based on the different
parameter................................................................................................................................4
Financial performance of Unilever in the last few years.......................................................5
Unilever Corporate Governance policy...................................................................................10
Part-B: Efficient market Hypothesis and security market price...............................................13
Conclusion................................................................................................................................18
References................................................................................................................................19

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Strategic Corporate finance of PLC Unilever
Part-A: Evaluating the Business performance of the PLC Unilever.
Introduction
This report is about the business analysis of a consumer durable company named PLC
Unilever. The purpose of the report is to measure the financial performance of the company
based on the certain financial & accounting concepts like financing strategy of the company,
corporate governance of the company, capital structure of the company, capital alteration
policy, dividend policy and the company merger & acquisition (Kim and Mauborgne, 2014).
Apart from the above, in the second part of the report a critical examination has been done on
the efficient market hypothesis concept and principles.
Company brief information
Unilever is a British-Dutch multinational consumer goods company with a
headquartered in London. The company sell house domestic as well as the consumable
products. The range of product include food and beverages, beauty product, personal care and
cleaning products (Herciu, and Ogrean, 2017). Unilever is recognized in Europe as the 7th
most prominent and valuable company. In this part the different strength of the market
efficiency has been discussed which are important in the determining the stock price of the
company. At the end of the report a concluding remarks has been added on the performance
of the company for the shareholder in order to decide whether the company is suitable for
making investment decision.

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Strategic Corporate finance of PLC Unilever
Evaluation of the business performance of Unilever Corporation based on the
different parameter.
Unilever is multinational company with a brand spread across 190 countries in the
world. The company deals in various types of product which is from consumer durable
goods. The company is having 400 house hold brand which includes Lipton, Dove, Rexona,
Hellmann’s and many other. In the year 2018 the company has set a records of one of the
largest fastest moving consumer goods corporation globally. In the year 2018 the company
has a 12 prominent brands which is contributing to the company revenue over billions of
Euro’s per year (Kim and Mauborgne, 2014).
Based on the market penetration and consumer interaction, it has noted that out of the
world top 50 most influential FMCG brand, the top 13 brands are owned by the Unilever. The
company believe in the sustainable development and equitable growth model for sustaining
the business of the organization for longer period.
Picture depicting the product process cycle of Unilever

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Strategic Corporate finance of PLC Unilever
Financial performance of Unilever in the last few years
The company has delivered a solid performance in the all the major product segment,
despite of the many challenges faced by the company, due to various geopolitical scenario,
the Company is managing its business operation in the various parts of the world. The
company over all sales revenue grew by 3.1%, the business of the company has shown a
tremendous growth as a results the company operating profit margin has increased to 18.4%
which is 90 basis points above the previous profit. The company overall business
performance result is encouraging. The company has achieved a good balance in the price
and volume growth which has been the contributing factor for the company growth.
Some of the major financial decision taken by the company for the business
Expansion and growth has been enumerated below.

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Strategic Corporate finance of PLC Unilever
Equilibra Acquisition: Unilever has acquired 75% stake in the Italian personal care beauty
and well-being brand named Equilibra. This will help the company in penetrating its business
in the Italian market which was earlier captured by the competitive rivals (Ghiassee-Tari,,
and Nilsson 2014).
Recognition in DJSI: Dow’s jones sustainability index (DJSI) has recognized Unilever as a
leader in the personal care product industry. The company has achieved industry best score in
many areas including the brand management, innovation, packaging and environment
change.
Promoting digital cleaning: For the promotion of the company in the digital world, the
company has built a network of Unilever trusted publisher. This move of the company will
protect it from the people who are intentionally involved in defaming the company brand.
Acquisition of the Garancia: The Company has made an acquisition of French cosmetic
brand named Garancia, which was a leading cosmetic brand in France, the company sell 38
kind of cosmetic and beauty care product through a pharmacy channel in France.
Reconsidering food packaging: the company has tied a Partnership agreement with a
startup named Lonica and world largest producers of Pet resin. This agreement has been done
to convert PET wastage into pure grade material to be used in the food packaging industry.

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Strategic Corporate finance of PLC Unilever
Consolidated Income statement of the company showing the financial performance.

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Strategic Corporate finance of PLC Unilever
Picture depicting the share price movement of PLC Unilever in a period of Five year.
Analysing the movement of the company the share price
Important news and parameter which are responsible for influencing the share prices of the
company.

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Strategic Corporate finance of PLC Unilever
 The percentage change in Unilever’s waste impact (packaging that is not recycled and
leftover product), a reported 31 % decrease in the waste associated with the consumer
use of product.
 Unilever PLC and Unilever N.V buy back their share with an aggregate market value
equivalent of up to 6 billion Euro. This action of the company increases the debt to
EBITDA ratio of 2.0x.
 The company is regular in the payment of the dividend to the company shareholder
directly into their bank account. The company paid to the shareholder on quarterly
basis. The company dividend reinvestment strategy is a suitable, easy method to build
your shareholding in Unilever PLC by using the cash dividend to buy additional
shares.
Company Acquisition and merger
The company has done some of the major acquisition and disposals in the following
years.
 In the year 2018 the company announced the acquisition of 75% stake in Equilibra,
the Italian personal care and wellbeing brand.
 On July 2018, Unilever’s announced the sales of the spread business to KKR and
Remgro.
 On 1st march 2018, the company has made an acquisition of the Quala’s beauty &
personal care and home care brands.
 On 2nd January the company acquire Schmidt’s Naturals which is beauty and
personal care Company based in Portland, Oregon.
 On 18 December 2017, Sundial - a fast growing company of new-York related to hair
and skin care.

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Strategic Corporate finance of PLC Unilever
 On 11 December 2017, the acquired the TAZO brand from Starbucks. TAZO is
leading brand in the Tea category.
 On 1 December 2017, Unilever acquire Mae Terra a fastest growing and well- loved
brand in Brazil, which sell organic and nutritious food product.
Unilever Corporate Governance policy.
Unilever sustainable governance and its relation with the financial performance.
The company strong governance principle and the strong lines of the accountability
are the major force working on the sustainable development plan of the company. The
company has successfully incorporate their commitment towards the business goal of the
organization in the mission, vision and the Unilever sustainable living plan. The company
brand, innovation, sourcing and operation are important factors in achieving the Unilever
sustainable living plan.
The company is contributing their corporate social responsibility, by the working on the
four main areas of the organization which include the following:
 Adoption of the business strategy which are working on the climate change and
protection of the forest and wildlife (Baah, Tawiah, and Opoku, 2014).
 Improving the standard of living of the people across globe, and generating more
opportunity for the women to work.
 The company aimed at improving the health and the well-being of the people
particularly in the water, sanitation and hygiene
 Adoption of the business strategy to tackle the problem of the food security
 Development of sustainable agriculture and the focused use of land.

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Strategic Corporate finance of PLC Unilever
 The company has given special preference in improving the role of women in the
eradication of poverty, and accelerating the global development.
At the core of the transformational change in the policy of the company, the aim is two-
fold like combating the climate change and the promotion of the human development. The
company has been successfully able to create more opportunity for the women across the
value chain (Baah, Tawiah, and Opoku, 2014).
Key success factor of the company in determining the company competitive advantage.
 Customer focused: The customer chooses to buy the product of the company in
comparison of the competitive business.
 Well planned strategy: Implementation of the powerful company business strategy
which help in the taking the competitive advantages.
 Recognition: Unilever is a widely recognized company in the fast moving consumer
industry, with a large customer base.
 Market understanding: The Company has the ability to take advantage of the
economies of the scale, and learning and experience curve effects.
 Technology: The Company has the superior capability in the cost advantages, product
innovation, proven skills in improving the product process, a good reputation of the
customer service and the sophisticated use of the E-commerce technology in the
customer service.
 Costing: The Company is expanding its business operation in the new geographic
market and the product segment like expanding the customer product line to meet a
broader range of the customer needs. The company is using the internet and e-
commerce technology to dramatically cut down the cost and search for new sales
growth opportunity (Mohamed, M.S. and Banu, M.S., 2015).

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Strategic Corporate finance of PLC Unilever
 Operation Excellence: The company long term objective and strategic business
planning has been set for the business product based on the profitability, productivity,
competitive position, technological leadership and the public relation.
Reducing the Environmental Impact
Unilever works on the minimizing the environmental impact of their operation.
Therefore the company has made a proper strategic plan to reduce the impact of the
greenhouse gases, water uses, and Eco-efficiency product.
The company has taken important steps in the protection of environment.
 Reducing Plastic Wastage: The Company has funded € 100000 in a crowd sourced
solution as a part of its initiative to reconsider plastic container. The company
objectives is to reduce the solo sachets of washing powder which is general problem
confronted by the ecosphere in terms of the plastic wastages.
 Acquisition of Nutrition Company: The Company has made an acquisition of the
Horlicks and other consumer health care nutrition product from the GlaxoSmithKline
in the country like India, Bangladesh and 20 other countries across the globe.
 Disclosure personal care ingredient: Unilever has decided to disclose the major
constituent such as fragrance used in making the home, beauty and personal care
product, such commitment by the company will surely help in enhancing the
transparency and the build the customer trust on the brand.
 Sustainable packaging: Three year partnership agreement has been signed by the
company with Veolia on sustainable packaging. This move by the company will

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Strategic Corporate finance of PLC Unilever
improve garbage accumulation and the recycling arrangement and thus help in
protecting the environment from the plastic wastage.
 Ban against animal cruelty: Unilever has taken major steps against animal cruelty
by supporting the ban on animal testing for the cosmetic product and personal care.
 Forest sustainability: at the global climate Action summit, Unilever and Walmart
have signed an agreement for the protection of forest and reduction of greenhouse gas.
These action by the company will reduce 17 million metric tons of greenhouse gas
emission.
Figures showing the Performance of the company in the protection of environment.

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Strategic Corporate finance of PLC Unilever
Part-B: Efficient market Hypothesis and security market price
In financial economics there is a concept of Efficient-market hypothesis which states
that security prices reflects the all available information to the related to the market (Abdela,
2014.). The concept was discovered by Eugene Fama, who states that stock price of any
assets trade at fair market value, this attributes of the market price is crucial as it did not
allow the investor to predict to the market before. Therefore, it is impossible to beat the
market by purchasing either the undervalued stocks or trade the stock at overstated price.
As per the theory, an investor can only earn favorable return from the market only
when they invest in the risker investment or depends on the market probability. In the year
2012, concept of Efficient-market hypothesis, is supported by the Kenneth French. He states
that US mutual fund return have achieved the same abnormal return, which is similar to the
return if no fund manager had any skills. This is the necessary condition to hold
(Acheampong Agalega, and Shibu, 2014.).

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Strategic Corporate finance of PLC Unilever
According to this hypothesis, there are three variants form of the efficient market hypothesis,
that are mentioned below like
 Weak Hypothesis
The weak form of the EMH states that the prices of the traded security and the assets like
Stock, bonds or the property already incorporate all the publicly available past information
and data (Agyei, and Owusu, 2014). Further this principle also explains that historical prices
and the data volume have no association with the future movement of the security market
trend.
This hypothesis states that Excess return on the stock is not possible to earn by just using
the technical analysis. Share prices display no serial reliance, meaning that assets prices do
not provide any clue of the pattern of the price movement.
 Semi-strong Hypothesis
Efficient-Market
Hypothesis
Weak form of
Hypothesis
Semi-strong
Hypothesis
Strong form of
Hypothesis
Includes three
variants

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Strategic Corporate finance of PLC Unilever
The semi-strong form of the EMH states that prices of the traded assets, incorporate
instantly all the available market information and the prices of the traded assets like stock,
bond, and property (Ajibolade, and Sankay 2013). This hypothesis also conclude that
fundamental analysis is not sufficient enough to earn highest return on the traded stock.
The semi-strong form of the EMH states that prices of the traded assets, incorporate
instantly all the available market information and the prices of the traded assets like stock,
bond, and property. This hypothesis also conclude that fundamental analysis is not sufficient
enough to earn highest return on the traded stock.
 Strong Hypothesis
The strong form of efficient market hypothesis explains that the current stock prices
should fully reflect all the public and private available information. The concept states that all
the market, non-market and the inside information all have been incorporated in the security
prices of the traded assets (Agyei, and Owusu, 2014).
The strong form states that no individual or the organization is having monopolistic
access to the necessary information. This principles concludes that the consistent return is
impossible to earn in the security market.
The market economic efficiency can be achieved through various ways. The most
famous ways include the following.
1. Invisible hand of the competitive market
Adam smith in his work named “the wealth of the nation” the competition would lead
the individual in the focus of his personal interest which is individual profit
(Ghiassee-Tari, and Nilsson 2014). This will result in the overall public interest.
Therefore any kind of government intermediation is not desirable. However it has

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Strategic Corporate finance of PLC Unilever
been seen that allowing the market to work on its own does not result in the necessary
outcomes.
2. Efficiency and equilibrium in competitive markets
In a competitive market, efficiency can be achieved by the using the concept of the
supply and demand curve. As per the concept the supply and demand is the point
where the market attains its equilibrium. Which implies the marginal benefits equal to
the marginal cost (Herciu, and Ogrean, 2017). Which is essential requirement of the
achieving for achieving the economic efficiency.
3. Pareto efficiency
This model states that to study the government intervention in the economy,
Pareto efficiency is the best criteria. As per the principle of Pareto efficiency which
states that no one can be made better off without some being made worse off. An
economy is considered to be efficient when the marginal social benefit is equivalent
marginal social cost (Raj, K. and Aithal 2018).
Marginal social benefit indicates only one particular change that indicate a gain to
the Society, while the marginal social cost stand for the cost of the change.
Consequently, because the market is considered to be efficient and any change is in
the market would not induce any net gain. There are three main fundamental situation
for the Pareto efficiency which are also beneficial for the examination of the
economic efficiency.
 Exchange efficiency
As per the rule which means that all the produced goods in an
economy should be distributed to the individual for whom they are most
valuable. It is based on the idea that distribution of goods follows a principle

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Strategic Corporate finance of PLC Unilever
in which “no one can be made better off without making some one worse off
“.
Accordingly, there will not be a situation which will make two
individual involve in the trade to be in a better position i.e. either one of them
should have to bear loss and other have to gain profit.
 Production efficiency
The resources possessed by the society, therefore the increase in
production of one goods is not possible without reducing the production of
another good (Gupta, and Sur, 2013).
To evaluate the production efficiency of the economy two
methodology are used namely isocost and isoquants lines. The slope of the
isoquant lines is represented by the marginal rate of technical substitution.
 Product mix efficiency
As per the concept, for the market to become efficient the produce
goods must meet the desires of the individual. For this purpose the business
organization must understand the preference requirement of the individual
customer. Such evaluation is possible with the application of the production
possibilities schedule.
Conclusion
From the above analysis of the report it can be concluded that for the growth of any
organization, Strategic decision play a crucial role in the business performance management.
The corporate strategy of the company are most effective when they are built in line with

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Strategic Corporate finance of PLC Unilever
company corporate governance policy, dividend policy, Merger and acquisition
activity ,company capital structure and financing approach (Laszlo and Cescau, 2017).
In the case of PLC Unilever, the company financial performance has improved lot
both in the terms of business growth and its corporate social responsibility. In the last 5 years
the company has made several business acquisition in the field of the cosmetic and beauty
products. The company had acquired the competitor business to penetrate its business in the
country of the rival firm. For example Unilever has taken major stake of 75% in the
Equilibra, which is a company Italian personal care beauty brand. Further the company has
made an acquisition of the Horlicks and other consumer health care nutrition product from
the GlaxoSmithKline in the country like India, Bangladesh and 20 other countries across the
globe.
Also The Company has made an acquisition of French cosmetic brand named
Garancia, which was a leading cosmetic brand in France, the company sell 38 kind of
cosmetic and beauty care product through a pharmacy channel in France. In the second part
of the report a critical examination of efficient market hypothesis has been done. As per the
hypothesis, security market prices fully reflect all the available information. This hypothesis
reflect the true position of the market security, which incorporate all the freely available
information. The discussion has been supported by the several market factors like Exchange
efficiency, production efficiency and the Pareto efficiency.

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Strategic Corporate finance of PLC Unilever
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Strategic Corporate finance of PLC Unilever
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Strategic Corporate finance of PLC Unilever
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