Abstract/executive summary

This report will be presenting a detailed report on the development and sustainable strategic
management analysis of two companies Unilever and Tesco. It will be able to cover the financial
analysis and performance of both companies for the last three years. An in-depth financial
performance of both companies will be analyzed and a raft of measures to be put in place. A
sustainable development strategy will be recommended at the end of this report so as to advise
investors, management and the general public. This article will also examine the different
dimensions of both companies, what it offers based on the numerical data from the financial
statements of these companies. A detailed analysis of the industry, market opportunities and
challenges faced by the two companies Unilever and Tesco. The end of this report will outline the
findings and outlay a raft of recommendations for a sustainable development strategy for these
companies.
An Overview of Unilever and Tesco
UNILEVER PLC
Unilever plc is one of the parent companies of the Unilever group .Unilever is one of the world's
leading suppliers of FCMG fast moving consumer goods (www.unilever.com).Unilever is a
multinational corporation acting as a dual-listed company divided in Unilever PLC, which is based
in London, and Unilever N.V., which is based in Rotterdam. Nowadays, Unilever counts with
more than 400 brands and it is present 190 countries around the world aiming to achieve their main
goal – “to make sustainable living commonplace” (www.unilever.com) The strategy is: A belief
that sustainable business drives superior performance lies at the heart of the Unilever Compass –
our strategy to create long-term value for our stakeholders. Unilever is a diversified goods
company which is included in the Fast-Moving Consumer Goods (hereafter FMCG) industry.
FMCG are products that are sold very quick and at a relatively low cost, used on the daily basis
and for private consumption, such as personal care products, food and beverages, household
products or over-the counter drugs. FMCG industry, also called Consumer Packaged Goods (CPG)
industry, deals mainly with production, distribution, sales, operations, financing, purchases, supply
chain, marketing and general management. The different segments of goods include beauty &
personal care, Food Refreshments, and Home Care products.
Financial Performance
According to Kennedy & McMullen (1973) financial strength is the ability for a company to meet
the claims of creditors not only under current economic and business conditions, but also under
unfavorable situations that may occur in the future. The financial health of a company can be
derived from several financial data sources include inventory, accounts receivable, net income,
working capital, sales activity, fixed assets, and operating environment (Kennedy & McMullen,
1973).
Financial health of the business can help informs the company direction and how resources are
allocated. The financial health of the business can be evaluated through

The business ethics and integrity has earned reputation for the company over the years. The main
strategy of the company is to grow shareholders fund and balance liquidity and debt for the
company.
 It's one of consistent Fortune 500 companies continuously from last several years. Unilever is a
reputed brand and manufactures diversified range of products. The market value of the company
and presence worldwide created inclination to understand the financial perspective of the
company.

This report analyses the company's financial perspective through the financial tool ratio
analysis. It evaluates the company's performance on profitability, liquidity, long-term gearing of
the company and cash flow per share. The report also covers the shareholder's perspective and
suggests the investors on the company's future performance.

Financial Analysis

financial statement analysis as well as analyzing the financial ratios. However for this task only
the financial ratios of Unilever Plc are analyzed over time. Financial ratios help in understanding
numbers presented in financial statements, and are powerful tools for determining the overall
financial health of the company. Ratios fall under a variety of categories, including profitability,
liquidity, solvency, efficiency, and valuation.

Some of the financial ratios considered are categorized mainly in profitability, liquidity and
efficiency ratio of which some are explained below;

 Operating profit margin: This measures the amount of profit from operations generated
from every sale made.

 Net profit margin: The percentage of profit the company generates after all expenses have
been deducted from revenue, including interest and tax from revenue

 Return on Capital employed: This shows how much profit from operations is generated
from every capital (equity and debt capital) invested in the business.

 Coverage ratio: The company’s ability to meet its financial obligations, specifically to cover
its debt and related interest payments

 Current ratio: The company’s ability to meet short-term obligations of less than one year 
Quick / acidity ratio: The company’s ability to meet short-term obligations of less than one year
using only highly liquid assets

 Receivable days: This measures how efficiently the business is collecting money due and a
reduction in days over time is the ideal.

 Payable days: This measures the speed it takes to make payment on credit purchases. 
Inventory days: Holding period measures the number of days on average that inventories are held
and will depend upon type of goods sold.
  Working Capital cycle: Measures the length of time of cash turnover to cover short-term
obligations. The shorter the better.

Unilever Financial ratios are compared across period of 3 years as highlighted in the tables
below

Unilever Financial ratios are compared across period of two years as highlighted in the table
below;

UNILEVER PLC FINANCIAL PERIOD 2018 2019 2020

PROFITABILITY RATIOS
· Operating profit margin 24.59% 16.62%

· Net profit margin 19.21% 11.59%

· Return on capital 34.03% 22.99%

employed
 LIQUIDITY RATIOS
· Current ratio 0.77 0.78

· Acid test 0.55 0.58

EFFICENCY/WORKING CAPITAL MANAGEMENT RATIOS

· Receivables days 46.41 47.01

· Payables days 23.77 23.55

· Inventory days 7.07 6.64

· Working capital cycle 29.71 30.1

Sources of data:

1. https://www.londonstockexchange.com/stock/ULVR/unilever-
plc/fundamentals?lang=en

2. https://www.unilever.com/Images/ir-q4-2019-full-announcement_tcm244-
543823_en.pdf

INTERPRETETION

The profitability ratios indicate that there was an overall decrease for in 2018 as compared to
2019. All the analysed ratio show a decrease the operating profit margin by 7.97% the net profit
margin reduced by 7.62% and the ROCE by decreased the most by 11.04%. The ability for the
company to pay short-term liabilities using the short term assets in 2018 and 2019 has remained
almost the same with a small difference. The Acid test ratio shows that the company was more
liquid in 2019 as compared to 2018 thus able to pay the liabilities despite the reduction in overall
profitability in the same year. The efficiency ratios indicate that the receivable days slightly
increased, payable days did not have much change while the day inventory is held reduced and
the length of time for cash turnover increase. In summary if consideration is made only to the
ratio analysis shows a reduction in the general performance and health of Unilever plc in 2019 as
compared to 2018 ratios