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Unilever (ULVR) has posted full-year underlying sales growth of 3.7% and a rise in profitability, although growth slowed significantly in the fourth quarter.

Unilever’s 3.7% underlying sales growth was driven by a 2.8% increase in price and a 0.9% increase in volumes.

Sales increased by 4.3% at constant exchange rates while turnover, but at current rates this represented a decline of 1% to €52.7bn.

Sales growth slowed notably in the fourth quarter amid “particularly challenging” conditions, as underlying sales growth dropped to 2.2%.

Emerging markets was the standout region, with underlying sales growth of 6.5% consisting of 5.4% price increases and 1.1% growth in volumes.

Underlying sales in developed markets fell back 0.2%, with European sales down 0.7% in the full-year. In the fourth quarter developed market sales were down 1.2% with European down 2.3%.

Operating profit was up 3.8% in the year to €7.8bn, with core operating margin increasing 50bps tp 15.3%. Net profit was up 5.5% to €5.5bn.

CEO Paul Polman said: “We have delivered another good all-round performance despite severe economic disruptions, particularly in India and Brazil, two of our largest markets. This further demonstrates the progress we have made in transforming Unilever into a more resilient business.

“We have again grown ahead of our markets, driven by strong innovations that support our category strategies. At the same time, we have accelerated our margin expansion even after absorbing the higher restructuring costs associated with the implementation of ‘Connected 4 Growth’, the next stage in our transformation.”

“At a time of unprecedented global change, ‘Connected 4 Growth’ will make Unilever simpler, faster and more connected with our consumers and customers, and we are already starting to see positive results.

“Our priorities for 2017 continue to be volume growth ahead of our markets, a further increase in core operating margin and strong cash flow. The tough market conditions, which made the end of the year particularly challenging, are likely to continue in the first half of 2017. Against this background, we expect a slow start with growth improving as the year progresses.”

On a category basis, home care was the best performer, growing underlying sales by 4.9%, followed by its biggest category personal care at 4.2%^, refreshment at 3.5% and foods at 2.1%.

Unilever shares have slumped 4.6% to 3,193.8p on the update this morning.

Morning update

A busy morning also brings interim results from drinks giant Diageo (DGE), which has reported a double-digit rise in net sales and operating profit.

Reported net sales were up 14.5% to £6.4bn in the six months to 31 December, with operating profit up 28% to £2bn driven by favourable exchange rates and organic growth.

On an organic basis, Diageo reported growth across all regions with volumes up 1.8% and net sales up 4.4%. Volume growth was down 1% on a reported basis as Diageo streamlined its portfolio during the year.

Organic operating profit grew 4.4%, driven by gross margin improvement, progress on productivity offset by implementation costs and the profit on sale of the United Breweries shares in the prior period.

Diageo also increased its interim dividend by 5% to 23.7p per share.

CEO Ivan Menezes commented: “We have delivered a strong set of results with broad based improvement in both organic volume and top line growth and this positive momentum demonstrates continued effective execution of our strategy.

“Highlights this half include improved performance in our US Spirits business and across our scotch portfolio, driven by our focus on marketing with impact, innovating at scale, expanding our route to consumer, and winning in reserve. Progress on productivity supports growth, margin improvement and consistent strong cash flow generation as well as improving our agility.

Diageo is building a stronger, more consistent, better performing company. We are identifying consumer trends faster, expanding the reach of our products across markets and developing trade channels to capture these growth opportunities. Our productivity work is on track, driving efficiency and effectiveness across the business. Our work on trade and marketing spend gives us better data enabling smarter, quicker decisions that generate higher returns.

Our expectations of delivering stronger financial performance this year are unchanged. We are confident of achieving our medium term objective of consistent mid-single digit top line growth and 100bps of organic operating margin improvement in the three years ending 30 June 2019.”

Net sales were up 3% on an organic basis in North America, 5% in Europe, Russia and Turkey, 4% in Africa, 11% in Latin America and the Caribbean and by 3% in Asia Pacific.

In Great Britain net sales were broadly flat as changes in its commercial footprint led to efficiencies, including inventory reduction. Baileys performance improved with net sales up 2% driven by increased on-trade activations especially around Christmas in the off-trade. Guinness net sales were flat, lapping last year’s ‘Rugby World Cup’, but it gained market share of share driven by improved distribution and innovation success with Hop House 13 Lager.

Tanqueray net sales grew 42% due to expanded distribution, while Smirnoff recovered momentum gaining share both in off-trade and on-trade, but net sales were down 6%.

Elsewhere this morning, Costa Coffee owner Whitbread (WTB) has posted a trading update for the 13 weeks to 1 December 2016.

Group sales were up 8.6% with like-for-like growth at 1.7%, boosted by 12.5% growth at Costa and like-for-like sales growth at the coffee chain of 4.3%.

Whitbread said Costa “ had another good sales performance”, growing total system sales for the first three quarters of the year by 13.0% to £1.3bn (10.4% at constant currency). Within this, franchise system sales grew by 13.6% to £503m (9.1% at constant currency), while Costa UK Retail grew system sales by 11.6% to £708m.

Costa Enterprises grew system sales for the 39 weeks by 9.3% to £322m, while International system sales increased by 21.4% to £287m (9.2% at constant currency).

Year to date it opened 186 net new stores worldwide and installed 1,266 Costa Express machines. This exceeds its own target for 1,250 installations during the ful year and takes the total number of Costa Express machines to 6,482, of which 696 are in international markets. It now expects to install at least 1,500 new Costa Express machines this financial year.

Chief executive Alison Brittain said: “We continue to make good progress against our three point strategic plan: to grow and innovate in our core UK businesses; to focus on our strengths to grow internationally; and to build the capability and platform to support future growth.

“Costa’s performance was supported by its new advertising and promotional campaigns and benefitted from the timing of the quarter end, which included a strong start to the Christmas period. For the comparable period, to 26 November, excluding this timing benefit, Costa’s like for like sales growth was 2.9%”

Finally this morning, travel food specialist SSP Group (SSPG) has issued a trading statement for its first quarter to 1 December, stating it has “had a good start to the new financial year and expectations for the full year remain unchanged”.

Revenue increased by 4.3% on a constant currency basis, comprising like-for-like sales growth of 2.4% and net contract gains of 1.9%.

Its creation of a joint venture with Travel Food Services in India in December 2016 added a further 1.1% to sales, bringing the total group revenue increase in the first quarter to 5.4%.

Total group revenue growth at actual exchange rates was 18.7%.

Like-for-like sales growth in the UK and Continental Europe has remained positive, driven by increased passenger numbers in the air sector. In North America it said the positive trends seen in 2016 have continued through the first quarter of 2017. In the Rest of the World, like-for-like sales growth is “in line with our expectations”.

In terms of outlook, SSP stated: “The new financial year has started in line with our expectations and the pipeline of new contracts is encouraging, although it is always difficult to predict the precise timing of the openings of new units.

“Whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets and our programme of operational improvements.”

On the markets this morning, the FTSE 100 has shrugged off Unilever’s share price slump to remain stable at 7,161.7pts.

Diageo has jumped 4.5% to 2,237.5p on its upbeat first half numbers, but Whitbread is down 4.4% to 3,882p this morning. SSP Group has edged up 0.2% to 399.75p.

Other risers this morning include FeverTree (FEVR), up 1.7% to 1,236p, McBride (MCB), up 1.3% to 161p and PayPoint (PAY), up 1.3% to 956p.

Fallers include McColl’s Retail Group (MCLS), down 4.2% to 176.3p, Associated British Foods (ABF), down 4% to 2,363p and Crawshaw Group (CRAW), down 3.6% to 20p.

Yesterday in the City

The FTSE 100 edged up 0.2% to 7,164.4pts yesterday, retaking a small proportion of the lost ground of recent weeks.

WH Smith (SMWH) was the sector’s standout performer, jumping 7% to 1,584p as the strong quarterly performance of its travel business led to an upgrade in full-year earnings expectations.

Other grocery stocks on the rise included Marks & Spencer (MKS), up 2.4% to 342.4p, Hotel Chocolat (HOTC), up 2.6% to 284.3p and British American Tobacco (BATS), up 2% to 4,894p.

However, it was again a tough day for most of the grocery/fmcg sector, with a number of big names slipping back during the day.

One of the worst hit was Dairy Crest (DCG), which dropped 2.3% yesterday to 585.5p, while Tesco fell 1.9% to 188.5p and Premier Foods dropped another 1.8% to 40.75p.

Other fallers included Greencore (GNC), down 1.3% to 220.5p, Booker Group (BOK), down 1.3% to 182.7p and Ocado (OCDO), down 1.2% to 250.3p.

Both Diageo and SSP Group fell ahead of their market announcements this morning, dropping by 1.1% to 2,141p and by 1.4% to 398.9p respectively.

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