Monday 22 October 2018 4:13 pm

Unilever hikes dividend by eight per cent with €6bn share buyback programme kicking off in May


Unilever said this morning it will be hiking its dividend by eight per cent with a share buyback of up to €6bn starting next month, as it looks to keep investors on side.

The consumer goods giant, which owns brands from Dove to Marmite, reported underlying sales growth – excluding its spreads business – of 3.7 per cent for the first quarter of 2018, with emerging markets underlying sales growth up 5.1 per cent.

It has raised its quarterly dividend eight per cent to €0.3872 per share.

Unilever shares dipped two per cent in early trading.

Turnover at Unilever came in at €12.6bn (£11bn), and without the spreads business, which it has agreed to sell, it was €11.9bn. That was a dip on the €13.3bn reported this time last year, after last year's had been boosted by a positive currency impact of 2.4 per cent.

It did add that markets in Europe remained challenging, with weak consumer demand, price deflation in several countries and a challenging retail environment hit sales growth for the quarter, particularly in France.

Looking ahead, Unilever continues to expect underlying sales growth in the three to five per cent range, and said it will complete the offloading of its spreads business in the middle of the year.

It announced a deal to sell spreads last December, in a €6.8bn deal with KKR.

Unilever chief executive Paul Polman said:

We are further improving the quality and speed of our global and local innovation as a result of a more agile, consumer-facing organisation. At the same time, we are maintaining strong delivery from our savings programmes and expecting to complete the exit from spreads in the middle of the year.

For the full year, we continue to expect underlying sales growth in the three per cent – five per cent range and an improvement in underlying operating margin and cash flow that keep us on track for our 2020 goals. We intend to start a share buy-back programme of up to €6bn in May to return the expected after-tax proceeds from the spreads disposal. We are raising the dividend by 8 eight per cent, reflecting confidence in our outlook.

HQ shift stirs up discontent

The company has been in the spotlight of late after announcing last month that it would be ditching its London HQ, instead opting for the Netherlands for its single corporate base.

It did say that another move to reorganise its business into three divisions – two headquartered in London and one in the Netherlands, reflected its long-term commitment "to both countries".

But a top 10 shareholder in Unilever aired their frustrations that the firm had not engaged with investors ahead of the move to create a unified headquarters in Rotterdam.

Columbia Threadneedle, which owns 1.5 per cent of the UK business, said it was "disappointed" with a lack of dialogue with Unilever.

Meanwhile, it was reported last week that investor discontent was brewing over Polman's bonus too. An advisory service run by the Investment Association is said to ahve issued a "red-top" warning over the £2m bonus.