Analysts and investors have hailed Unilever’s (LON:ULVR) to shake up its business in the wake of Kraft Heinz’s failed takeover bid earlier this year. The Marmite owner announced yesterday that it was planning to offload some spread brands and hike its payout to shareholders.
Unilever’s share price rose yesterday following the announcement, adding 0.98 percent to close at 3,978.00p, outperforming the broader London market, with the benchmark FTSE 100 index ending the session 0.39 percent lower at 7,303.20 points. The group’s shares have gained more than 25 percent over the past year, and are up by some 20 percent in the year-to-date.
Citywire quoted Hargreaves Lansdown analyst George Salmon as saying yesterday that the big news for shareholders was ‘the more aggressive plans for increasing profitability’ after investors’ hopes were raised by the Kraft bid.
“Following the swift rejection of Kraft Heinz’s interest, Unilever shareholders would have been expecting the group to flex its muscles, and it is certainly doing that,” he pointed out. “While the group is set to take on more debt, a series of efficiency drives means it is confident of some pretty chunky increases in profitability in the coming years.”
The FTSE 100 group announced yesterday that it had decided to exit its Spreads business, which includes brands such as Flora. The consumer goods giant also plans to launch a €5-billion share buyback this year, and will hike its dividend by 12 percent.
Top-ten Unilever shareholders meanwhile told The Times that the Anglo-Dutch group’s plan was the right response to the takeover attempt.
Charles Luke, a senior investment manager at Aberdeen Asset Management, the tenth largest shareholder in Unilever, explained to the newspaper that the month-long strategic review was a “pragmatic attempt” to accelerate change by increasing cost savings and using the balance sheet more efficiently.