AJ Bell : Unilever finds a new leader as Legal & General starts to look for one

Unilever finds a new leader as Legal & General starts to look for one

Russ Mould

30 January 2023

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AJ Bell press comment - 30 January 2023

• Unilever identifies new CEO as Jope era comes to an end after four-and-a-half years
• Sir Nigel Wilson to step down after more than eleven years at the helm of Legal & General
• Legal & General's total return under Sir Nigel has easily beaten that of the FTSE 100, whereas Unilever has lagged the benchmark index
• Ten FTSE 100 firms have now changed or announced a change in leader for 2023 (or 2024)

"Unilever's shares are offering a warm enough welcome to the company's new chief executive officer, Hein Schumacher, while the fall in Legal & General's share price reflects the esteem in which departing boss Sir Nigel Wilson is held by shareholders," says AJ Bell investment director Russ Mould. "Mr Schumacher will take the top job at the food to household goods and personal care giant on 1 July, to take the planned total of changes in FTSE 100 leaders to nine already for 2023, while Legal & General is suggesting the search for Sir Nigel's successor could take up to a year.

FTSE 100 CEO changes in 2023
Company	New CEO	Departing CEO	Date
Vodafone	Margherita Della Valle (interim)	Nick Read	01-Jan-23
Rolls-Royce	Tufan Erginbilgic	Warren East	01-Jan-23
Whitbread	Dominic Paul	Alison Brittain	17-Jan-23
Changes announced but yet to be enacted
Prudential	Anil Wadhwani	Mark FitzPatrick (interim)	Feb-23
Rightmove	Johan Svanstrom	Peter Brooks-Johnson	06-Mar-23
Halma	Marc Ronchetti	Andrew Williams	01-Apr-23
Unilever	Hein Schumacher	Alan Jope	01-Jul-23
Hargreaves Lansdown	Dan Olley	Chris Hill	Nov-23
United Utilities	Louise Beardmore	Steve Mogford	End-2023
Legal & General	TBC	Sir Nigel Wilson	TBC

Source: Company accounts

"Sir Nigel is currently the thirteenth-longest serving FTSE 100 boss, having taken the helm in June 2012. His tenure of 10.7 years is just more than double the FTSE 100 average of 5.3 years, whereas Alan Jope at Unilever will have managed just 4.5 years by the time he makes way for Mr Schumacher in July. Mr Jope currently sits 51^st in the FTSE 100 longevity rankings for CEOs.

Source: Company accounts, Refinitiv data

"Shareholders will no doubt be hoping that Mr Schumacher's arrival brings some degree of closure and calm to the Marmite-to-Domestos and Hellman's-to-Magnum group, after a tumultuous twelve months.

"Since the start of 2022, Unilever has failed in a £50 billion bid for the firm that is now Haleon, when it was still owned by GSK and Pfizer; attracted the attentions of activist investor Nelson Peltz; warned on profit margins; launched a €3 billion share buyback programme; been attacked for 'virtue signalling' by a major shareholder and focusing too much on sustainability and not enough on selling its products; and announced the planned retirement of the much-criticised Mr Jope as chief executive by the end of 2023.

"At least there is a chance that Mr Jope's term in office could end on a high, even if the share price has done broadly nothing during his tenure and the total return from Unilever stock has lagged that of the wider UK market, at 13.5% compared to 34.2% from the FTSE 100. (This a stark contrast to Sir Nigel's tenure at Legal & General, as the life insurer's 341% total return since he took over in June 2012 beats the FTSE 100's 120.2% hands down).

Source: Refinitiv data

"Back in October, Unilever raised its sales growth guidance and held its (previously downgraded) margin guidance alongside its third-quarter results, where price increases more than offset declines in volumes, to show the power of the company's brands.

Source: Company accounts

"All eyes will now be on the company's fourth-quarter and full-year results on 9 February and especially any guidance on operating margins for 2023. Unilever has previously flagged that it expected increased profit margins in 2023 and 2024, despite ongoing input cost pressures, thanks to both its brands' pricing power and internal cost and efficiency programmes.

"For 2022, Unilever has steered market expectations for underlying operating margins to come in at around 16%, compared to 18.4% in 2021. This translates into analysts' estimates for underlying operating profit of €9.65 billion, against €9.63 billion in 2021.

"Stated operating profit, including around €1 billion of restructuring costs and the impact of acquisitions, disposals and asset write-downs is seen reaching €8.9 billion by analysts, up from €8.7 billion in the prior year.

"More importantly, for 2023, analysts are currently pencilling in an increase in the underlying operating margin to 16.6%, for an underlying operating profit of €10.2 billion and a headline operating profit of €9.5 billion.

Source: Company accounts, analysts' consensus forecasts, Unilever investor relations website

"That is still a fair way below the 20% target initially outlined by Mr Jope before the worldwide return of inflation, but an improved return on sales would provide some foundation and momentum upon which Mr Schumacher can build."

Russ Mould Investment Director

Russ Mould's long experience of the capital markets began in 1991 when he became a Fund Manager at a leading provider of life insurance, pensions and asset management services. In 1993, he joined a prestigious investment bank, working as an Equity Analyst covering the technology sector for 12 years. Russ eventually joined Shares magazine in November 2005 as Technology Correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media, by AJ Bell Group, he was appointed as AJ Bell's Investment Director in summer 2013.

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