Financial Report: Investment Decision Making at Unilever Post-COVID

This report assesses a proposed investment for Unilever, considering the impact of COVID-19 on its business. It employs investment appraisal techniques like Payback Period and Net Present Value (NPV) alongside a SWOT analysis to evaluate Unilever's position. The analysis suggests accepting the investment proposal based on the positive NPV, indicating a potentially high return. The report also discusses risk and return sensitivity, concluding that despite a diminished profit margin in 2022, the increasing return on equity makes Unilever an attractive investment. Ultimately, the report recommends diversifying the business through acquisitions to ensure long-term sustainability and growth. The payback period is calculated to be approximately 2.142 years. The report uses PESTLE analysis to assess the macro environment of the business.

Accounting and
Finance for decision
making

Contents
EXECUTIVE SUMMARY........................................................................................................3
Motivation of the proposed investment......................................................................................4
Conduct investment appraisal using both quantitative and qualitative information..................4
Critically discuss the risk and return and its potential impact on its financial performance.....7
CONCLUSION..........................................................................................................................8
REFERENCES...........................................................................................................................9

EXECUTIVE SUMMARY
The following report is based on the impact of COVID – 19 on the organisations that
would diversify the risk of the business. In the following the report, the organisation that s to
discussed about the impact of the COVID – 19 on its businesses Unilever. This is a business
organisation which is based and headquartered in London since 1929 and is running its
business operation to about 190 countries all across the world. It is a multinational
corporation which deals in the industry of consumer goods.
The purpose of the report is to analyse the proposing investment that would be
beneficial for the firm and from the investors point of view to know that whether it is
beneficial to investment in the company. Mainly the report revolves around proposed
investment that Unilever will think about making for growing and putting the business to
growth for the long – term. For this various methods of the investment appraisal techniques
will be applied for conducting a sensitivity analysis for the risk and return.
For satisfying the above purpose of the report, the conclusion and suggestion that
would likely to be given as per the report to the business organisation Unilever is that
investment proposal should be accepted using the NPV approach.
The recommendation that would be given to the firm is that the firm should focus on
diversifying its business through acquiring new corporations.

Motivation of the proposed investment
The real problem that is faced by Unilever due to COVID – 19 is that its sales
turnover has reduced.
It is very crucial to resolve it because if it does not take a major step then one by the year, the
efficiency and the productivity of the business concern will decrease.
The problem is caused because many of the business have planned to shift its
businesses online. This reduced the long – term sustainability of its major clients, which in
turn is lowering its monetary and economic position in the market.
The casual driver that would be taken as a part of fixing the problem of Unilever
financial position is that the management system should be handles over to look at the
inefficiency and the risk factors that exists in the marketplace between its competitors. For
changing and solving the probes, a deep analysis is required for the firm’s risk and return
capabilities and for finding out its strength and weaknesses (Bardal, 2020).
The capabilities that are necessary to be changes is a motivation level for solving the
problem. For this a new investment project could be proposed by the firm and it will act as a
motivating factor as well.
The deliverables that would define the capability of the firm is to invest in a project
that would give it a return which is overwhelming for the business entity and investors find it
very attractive to invest in such a company which is full of motivation and its need to
expansion it business more in the world.
Conduct investment appraisal using both quantitative and qualitative
information
For solving the problem, an investment proposal in made using the information about
the company Unilever. The methods which will be used for the quantitative information
would be Payback period, NPV and IRR (Berechman, 2018). For qualitative information, the
SWOT analysis would be an appropriate method for analysing the position of Unilever.
Payback period
Investment Proposal
Description Year 0
(£K)
Year 1
(£K)
Year 2
(£K)
Year 3
(£K)
Year 4
(£K)
Year 5
(£K)
Initial Investment Cost (200) (500) (50) (50)
Annual Benefits 150 250 400 600 850

Net Cash Flow (200) (350) 200 400 600 800
Cumulative Cash Flow (200) (550) (350) 50 650 1,450
Payback period = Number of years + Unrecovered Amount / Cash Flow in recovery year
= 2 years + (50 / 350) = 2 + 0.142 = 2.142 years
Net Present Value
Investment Proposal
Description Year 0
(£K)
Year 1
(£K)
Year 2
(£K)
Year 3
(£K)
Year 4
(£K)
Year 5
(£K)
Initial Investment Cost (200) (500) (50) (50)
Annual Benefits 150 250 400 600 850
Net Cash Flow (200) (350) 200 400 600 800
Cumulative Cash Flow (200) (550) (350) 50 650 1,450
Cost of Capital (CoC) 20.0%
Discount Factor 1.00 0.83 0.69 0.58 0.48 0.40
Present Value (PV) (200) (292) 139 231 289 322
Net Present Value (200) (492) (353) (121) 168 490
Year 0
(£K)
Year 1
(£K)
Year 2
(£K)
Year 3
(£K)
Year 4
(£K)
Year 5
(£K)
Net Present Value (200) (492) (353) (121) 168 490
PESTLE analysis of Unilever:

Political Factor: The association needs to withstand the guidelines and guidelines set
somewhere around the Food and Drugs Administration to decrease the intercession of
the public authority.
Economic Factor: The economy assumes a significant part in the activity of the business, on
the off chance that the financial state of a nation shows positive turn of events, it will be
more gainful for the association (Ellis and et.al., 2019).
Technological Factor: The association needs to chip away at its innovation since it helps in
working and dealing with the proficiency of the organization and it additionally requires
interest in the innovative work of the organization.
Legal Factor: The association is in the market from quite some time ago, in this way it
necessities to safeguard its patent and need to stand the guidelines and guidelines set
somewhere near the more significant position.
Environmental Factor: Unilever is having the option to work for the climate and is had the
option to work for the environment. The organization is additionally working for the UN
objectives of maintainability
SWOT Analysis:
Strength
Unilever works in almost 190 nations all
over the planet and has along these lines had
a worldwide effect and accumulated top
brand audits from purchasers all over the
planet (Fischer and et.al., 2019).
Weakness
The greatest disadvantage Unilever faces is
that it works in a very ferocious market
where other worldwide monsters like P&G
and Nestlé are testing it constantly in spite
of a multitude of adjacent players, and in the
trillion dollar FMCG (Fast moving
consumer goods) space.
Opportunity
In a universe of creation, the ascent of
wellbeing cognizant purchasers implies
Unilever can make the most of this valuable
chance to market to this portion of the
market with current yet conveyed scope of
items are normally outfitted towards
wellbeing cognizant purchasers.
Threat
Unilever works in a market region with
dramatically more product and decisions
close by than its brands, particularly in
creating business, so it is in danger from a
more modest and deft local area upstart who
More advantages can be furnished with less
money without bringing about the related

expenses.
Critically discuss the risk and return and its potential impact on its
financial performance
For measuring the sensitivity analysis of the company for its risk and return, it is
useful in assessing the degree of uncertainty in outcomes and results, as well as to determine
where risk can be reduced without causing losses. It aids in the analysis of the impact of
actions such as comparing sale-related outcomes and advertising (Ma and et.al., 2019).
The cost of capital which is taken for measuring an applying the methods of discount
models is at the rate of 8 %. It is goods for the new investment project and risk is low. So, the
company could take a chance in investing in the project. cost and benefits are Such factors
that are useful in assessing all investment related prospects and cost benefit can be presented
as a method which would have been useful in comparing the actual and anticipated cost in
accordance with planned projects. It emphasizes the notion of return a firm would be seeking
for obtaining in regard regarding explanation of cost of a capitalized project.
From the above computation of NPV, it can be said the project will give a positive
return to the company of £ 490 considering the cost of capital at a rate of 20 % as the return
on investment. It is very overwhelming for the company and it is giving a positive return that
too is majorly high form the investment made by the company. So, according to the method
of NPV, this project should be accepted and the firm should focus on enhancing the firm for
the long – term growth of the corporation. It revolves around distinguishing most achievable
investment related possibilities and open doors by working with and completing present
worth recorded during future income of an undertaking plan. The rule behind the strategy
picked is that it centres around expanding abundance level of investors, partners and
proprietors of business too (Pradhan, Arvin and Hall, 2019).
It is obvious that using the discounted payback approach will aid in calculating the time
required to recover the initial expenditure. It therefore infers that shorter the discounted
payback period is it would represent that quicker a project would be possible to manufacture
and financial resources to pay for repaying initial expenses. It likewise gives a thought
regardless of whether an organization ought to put resources into the arranged undertaking
and whether it would result to be beneficial as well as productive or not. The overall
investment that has been made for the project is of £ 800 and the cash inflows through this
investment in the 5 years is £ 1450. With this, the payback period that has been computed is

2.142 years which means in 2 years and 2 months approximately the firm will be able to
recoup the whole amount for the investment and if any further investment will be done in the
future years till year 5, then will be incur profit on the project. So, according to this method
the company should invest and go with the project (Sruthi and et.al., 2021).
On analysing the financial performance of the company Unilever, it is likely to be
said that profit margin of the company is diminished in the year 2022, but its return on the
equity is increasing. It means it is beneficial to investment in the company as the risk rate is
low and the return is high.
CONCLUSION
It could be concluded from the above report, that it is necessary to investment for the
company to achieve long – term sustainability in the market place and to increase its profit
margin which is likewise to be decreasing due to the impact of COVID – 19.

REFERENCES
Books and Journals
Bardal, K.G., 2020. Contradictory outcomes of cost-benefit analyses–Findings from
Norwegian public-investment projects. Research in transportation economics, 82,
p.100874.
Berechman, J., 2018. The infrastructure we ride on: Decision making in transportation
investment. Springer.
Ellis, G.D and et.al., 2019. Evaluating theory of structured experience propositions: Effects of
service quality and experience industry techniques on quality of immediate leisure
experiences. Annals of Leisure Research, 22(5), pp.587-606.
Fischer, S.B and et.al., 2019. From design to implementation: a participatory appraisal for
silvopastoral systems. In Strategies and tools for a sustainable rural Rio de
Janeiro (pp. 87-103). Springer, Cham.
Ma, W and et.al., 2019. Establishment of appraisal system for the stem and branch
characteristics and varieties evaluation of spray cut chrysanthemum. Scientia
Agricultura Sinica, 52(14), pp.2515-2524.
Pradhan, R.P., Arvin, M.B. and Hall, J.H., 2019. The nexus between economic growth, stock
market depth, trade openness, and foreign direct investment: the case of ASEAN
countries. The Singapore Economic Review, 64(03), pp.461-493.
Sruthi, N.U and et.al., 2021. An overview of conventional and emerging techniques of
roasting: Effect on food bioactive signatures. Food Chemistry, 348, p.129088.