Financial Analysis of Ultimate Software

Ultimate Software (NASDAQ: ULTI) is a corporation that designs, markets, implements, and supports human resources (HR), payroll, and talent management software primarily in North America with the ability to track employees in more than 100 countries. In 2009, Ultimate had $196.6 million in revenues[1] and approximately 1,900 customers.[2] Its headquarters are in Weston, Florida and its primary product is UltiPro.

Ultimate Software is a Delaware corporation formed in April 1996 to assume the business and operations of The Ultimate Software Group, Ltd. (the Partnership), a limited partnership founded in 1990. Ultimate Software, sharing some similarities with Taleo Corporation a leader in the Software as a Service (SaaS) space for talent management solutions - is focused on human resources and talent management solutions but, in addition, provides payroll functions. Headquartered in Florida, the company delivers Web-based payroll and employee management solutions to organizations of all sizes. Ultimate Software's UltiPro Workforce Management Software suite enables businesses to manage human resources and payroll strategically and cost-effectively, benefiting everyone in the organization by providing access to value-added resources via the Internet. UltiPro includes human resources, payroll, benefit management, comprehensive reporting, benefit enrollment, employee administration, recruitment, and training management. Customers are able to manage every aspect of the employee lifecycle in one place. UltiPro is designed for mid-sized customers, with 600 to 15,000 employees, and leverages the Microsoft technology platform. Ultimate Software's BSP Solution is marketed to business service providers (BSP) that have relationships with organizations with fewer than 500 employees. This product is easier and more convenient for smaller companies to use, and it leverages functionality from UltiPro. Ultimate Software's hosted offering, branded Intersourcing, provides Web access to comprehensive workforce management functionality for organizations that need to simplify the information technology (IT) support requirements of their business applications. This offering is designed to provide an appealing pricing structure to customers who prefer to minimize their initial cash outlay. UltiPro is marketed primarily through the company's direct sales team. The company has over 1,400 customers, representing over 7,000 companies. Ultimate Software's customers operate in a wide variety of industries, including manufacturing, food services, sports, technology, finance, insurance, retail, real estate, transportation, communications, healthcare and services.
Unilever (NYSE: UL) makes food and beverage products like soup, tea, and ice cream; Lipton, the company’s namesake tea brand, is sold in over 110 countries and has global market share three times greater than its nearest rival [1]. The company also sells home and personal care products like laundry detergent, skin care products, and deodorant. Each division accounts for around half of the company’s annual revenue. The European-based company has a large presence in the developing world and in 2009 49% of sales came from Developing and Emerging (D&E) countries such as Brazil, India, and China.[2]

Unilever was particularly affected by the economic downturn as the demand for its products fell due to consumers being price and product conscious. As a result, in 2009 the company's net income fell 30.8%.[3] However, as the economy continues to rebound in 2010, Unilever is seeing different results. In Q1 2010, sales growth and net income grew 4.1% and 31% respectively.[4]

The company faces additional challenges in its home and personal care product segment as its largest competitor Procter & Gamble continues to grow.

Company Overview

Unilever Group
Unilever PLC (UL) and Unilever NV (UN) operate as the two parent companies that form the Unilever Group. NV and PLC and their group companies constitute a single reporting entity for the purposes of presenting consolidated accounts.[5]

Product Segments
Food
Savoury, Dressings & Spreads - Products sold in this segment include soups, bouillons, sauces, snacks, mayonnaise, salad dressings, olive oil, margarines, spreads, and frozen food. These products are sold under the brands Knorr, Hellmann’s, Becel/Flora (Healthy Heart), Rama/Blue Band (Family Goodness), Calvé, Wish- Bone, Amora, Ragú and Bertolli.
Contents
1 Company Overview
1.1 Unilever Group
1.2 Product Segments
1.2.1 Food
1.2.2 Home & Personal Care
2 Business Growth
2.1 FY 2009 (ended December 31, 2009)[3]
2.2 Q1 2010 (ended March 31, 2010)[4]
3 Trends and Forces
3.1 A Sluggish Global Economy Hurts Unilever
3.2 Building Consumer Base: Focusing on the Youth
4 Competitors
5 References
Ice Cream and Beverages - Ice cream is sold under the Heart, Cornetto, Magnum, Carted’Or and Solero, Wall’s, Kibon, Algida, Ben & Jerry’s, Breyers, Klondike, and Popsicle brands. Tea products are sold under the Lipton, Brooke Bond, and PG Tips brands. Slim Fast is the company’s principle weight management product. The company also provides nutritionally enhanced products to developing markets such as Annapurna and Adez.
Home & Personal Care
Personal Care Products - The company provides products in mass skin care, daily hair care, and deodorants sold under six global brands: Dove, Lux, Rexona (including Sure and Degree), Sunsilk (including Seda), Axe, and, Pond’s.
Home Care Products - Laundry products are sold under the Omo, Surf, Comfort, Radiant, Skip, and Snuggle brands. Surface cleaners and bleach are sold under the Cif, Domestos, and Sun brands.
Business Growth

FY 2009 (ended December 31, 2009)[3]
Annual turnover fell 1.7% to € 39.8 billion (roughly $47.6 billion) due to lower demand from the global economic downturn.
Net income fell 30.8% to € 3.7 billion (roughly $4.4 billion).
Q1 2010 (ended March 31, 2010)[4]
Turnover increased 6.7% to €10.1 billion (roughly $12 billion).
Underlying sales growth grew 4.1% with the most growth in the Asia/Africa region (7.6%) and the ice cream & beverages and personal care segments, which had 7.4% and 7.9% growth respectively.
Net income grew 31% to €1 billion (roughly $12 billion).
Trends and Forces

A Sluggish Global Economy Hurts Unilever
In a slow economy, consumers spend less money on non-essential goods and tend to opt for the cheaper alternative. Families that are particularly affected by the economy change their habits so instead of buying Ben & Jerry's for dessert they might not have it at all and instead of buying the more expensive Dove brand of soap they might buy the cheaper generic alternative. Unilever is particularly affected by economic fluctuations because almost half of its revenue comes from developing countries and emerging markets. These markets are extremely sensitive because when the economy is down and unemployment is high, the priority is to provide only the essentials to living. As a result, the demand for Unilever's products fall and the company's bottom line is hurt. In 2009, the company's net income fell 30.8%.[3]


However, as the economy continues to recover in 2010 and consumers are more willing to spend money, the demand for Unilever's products will increase. In Q1 2010, the company's underlying sales growth was 4.1% with positive growth in all of the company's regional and product segments.[4]

Building Consumer Base: Focusing on the Youth
An important part of Unilever's marketing strategy is to focus their attention on teenagers. If the company can get young people to start buying its products at an early age and build a strong consumer relationship with them, this forms a strong and reliable consumer base that will continue to use many of those products into adulthood. [6]. Unilever has many products targeted at teens and young adults such as Axe body spray, Dove soap, and its new Clear anti-dandruff shampoo which has 15.6% of the shampoo market share and has replaced Procter & Gamble's Head & Shoulders for the market lead [7].

Competitors

Because Unilever makes a wide range of products selling in different markets, the company faces competition from both big companies with a diversified line of products and smaller narrowly-focused companies.

In the Major Diversified Food industry, Unilever competes with ConAgra Foods (CAG) , Kraft Foods (KFT) , and Tyson Foods (TSN).

In the Household and Personal Products industry, Unilever is second in the world only to Procter & Gamble Company (PG). Another competitor is Henkel, which like Unilever, is a large international corporation that produces personal care products.
 
Last edited:
Top