In absolute euros, underlying operating profit was up 12% in constant exchange rate and 2.6% in current, reflecting the higher-than-normal drag from currency on the 2023 result. Absolute profit is a metric I follow closely and something that you will hear us talk more about in the future. Both Hein and I believe deeply that continued gross margin improvement must be the backbone of our plans going forward. The return of gross margin to prepandemic levels is an absolute priority. We are already making good progress with gross margin up 200 basis points in the full year to 42.2% and a strong acceleration of 330 basis points in the second half of 2023. Net material inflation moderated in the second half, but we did not see deflation. Our price coverage improved as the year progressed, but we have not yet fully recovered the impact of cost inflation since 2020.
We continue seeing the benefits of mix coming from portfolio optimization in several areas, such as acquisitions and disposals, premiumization and removal of unprofitable SKUs. Improvement in conversion costs will be a key priority going forward and one of the key areas where our new net productivity program will be focused. Underlying earnings per share were EUR 2.60, up 11% in constant currency and 1.4% in current exchange rates. We saw a strong positive contribution of 10.3% from operational performance as a result of combined top line growth and margin expansion. Finance costs made a positive contribution to underlying EPS of 2% at constant currency. Whilst we did see the impact of high interest rates on our debt, this was more than offset by higher interest income and a higher interest credit from pensions.
Tax was a drag of 1.6% on underlying EPS. As we saw our underlying effective tax rate increase to 25.6%. This was primarily due to an increase in nondeductible interest payments and lower benefits from tax settlements and other one-off items. Our guidance for the underlying effective tax rate remains around 25%. The impact of our share buyback program made a positive contribution, which was mainly offset by higher minority interest. The combination of the above resulted in underlying earnings per share increasing by 11% in constant currency. This strong operational performance was mostly offset by a negative currency impact of 9.6% to leave underlying EPS up 1.4%. Free cash flow for 2023 was strong at EUR 7.1 billion, up EUR 1.9 billion versus 2022, resulting in a cash conversion ratio of 111%.
The main drivers behind this strong delivery, were the operational profit and improved working capital, although we also benefited from a one-off EUR 400 million tax refund in India. We increased capital expenditure to 2.9% of turnover. And going forward, we expect it around 3% as we continue to upgrade our technology and accelerate savings. Return on invested capital improved to 16.2%, slightly up against 2022 at 16%. This reflects the favorable working capital improvement, which reduced total invested capital. Finally, closing net debt was EUR 23.7 billion, in line with December ’22. Closing net debt-to-underlying EBITDA was 2.1x, in line with our guidance of around 2x. Proper capital allocation for maximization of value creation is an absolute priority for me.
As laid out by Hein in October, we will allocate capital behind 4 key streams. First, to drive organic growth, investment in superior R&D technologies to support multiyear innovation programs for our top 30 brands will be a key priority. R&D increased from 1.5% to 1.6% of turnover last year, and we are committed to increase spend again in 2024. Secondly, we will prioritize investment to drive net productivity. Whilst part of our capital expenditure is dedicated to align production and distribution capacity with our growth plans, we will significantly increase the proportion of our CapEx allocated to optimize our supply chain and unlock efficiencies. Thirdly, we focus on shareholder returns through an ongoing attractive dividend with payout ratios in the mid-60s.
We will supplement dividends with share buybacks when we have surplus cash available. In 2023, we returned EUR 4.4 billion through dividends and EUR 1.5 billion through share buybacks. Finally, we will continue allocating capital to bolt-on acquisitions to further strengthen our portfolio in premium segments and faster-growing channels, particularly in the United States. During 2023, we have been active with 5 important transactions: the disposals of Suave, Dollar Shave Club and the recently announced agreement to dispose Elida Beauty, which we expect to be completed sometime mid-’24. We also acquired two exciting premium brands, Yasso in Ice Cream and K18 in Prestige Hair Care. Before moving to 2024 outlook, let me tell you how we will measure competitiveness going forward.
Our current level of competitiveness is unacceptable, and we are investing and improving execution to turn it around. The current metric, percentage of business winning, has fundamental flaws. It is a binary metric that does not take into account the size of share gains and losses and it does not provide any color about our performance versus market growth. From now onwards, we will measure and inform competitiveness through turnover-weighted market share with a coverage of around 70% of our revenue. It is important to note that fast-growing parts of our portfolio, such as Food Solutions, Prestige Beauty, all accretive to growth will not be covered. As you can see, during the last 2 years, we have been growing above global market growth, which reflects our favorable geographical footprint.
However, we will not lie to ourselves. Turnover-weighted market share is the true measure of our competitive performance within the footprint in which we operate, and we are disappointed with a 75 basis point share decline. Of this, 60% is explained by Europe and 20% by the shift to super-premium segments in the United States personal care market. Fixing competitiveness will take time. We don’t expect to see an improvement in the first half of 2024, but we are committed to turn around our competitiveness. Let me close with the 2024 full year outlook. Our priority remains to drive organic top line growth. We expect underlying sales growth to be within our multiyear range of 3% to 5%. Underpinning this, we expect an improved contribution from underlying volume growth.
The impact of the Growth Action Plan will start to be seen in the second half. We expect to deliver a modest improvement in underlying operating margin for the full year. This will be driven by gross margin expansion through a step-up in productivity, while net material inflation returns to historic normalized level. In terms of capital returns, we remain committed to an attractive, sustainable dividend that will be supplemented by a EUR 1.5 billion share buyback program starting in quarter 2, time to coincide with the expected receipt of the proceeds of Elida Beauty disposal. With that, let me hand back to Hein.
Hein Schumacher: Thank you, Fernando. Let me turn now, as I said I would, to the Growth Action Plan. To recap, this was the plan I set out at the end of October following an intensive piece of work by a handpicked group of senior leaders across the business and it produced a growth action plan, which with the benefit of more than 7 months now in business, I’m even clearer is the right plan at the right time for Unilever. Since October, we’ve been implementing the plan at speed: priorities have been set, targets have been cascaded, metrics have been revamped, resources have been allocated, new leadership has been put in place. So in short, we’ve been reorienting the organization behind the plan. What I want to do today is to share with you in a little bit more detail what we are doing, but more especially where we are seeing signs of progress recognizing, of course, that we are at very early stage and that the benefits will build steadily as we will go through the year and beyond.
The plan has 10 action areas under 3 broad headings, underpinned by one simple premise, the need to do fewer things better with a greater impact, leading to a single overarching objective, the consistent of high-quality top line growth ahead of our markets. And I would love to say that we are within touching distance of that objective, but we are not. We know that we have work to do. But I’m confident we can get there. Everything is being directed to that effort. The plan starts with the need to deliver faster growth. And we believe that we have the brands to do exactly that, specifically, 30 of them on which we’ll focus first, our Power Brands. These are already proven drivers of growth. Last year, they were up 8.6% representing 90% of our total growth and 75% of group turnover, growing strongly and gross margin-accretive.
When we talk about the core, this is it. And by any standards, it’s a pretty strong core. So we will focus on these brands first. Now what does that mean in practice? Well, the vast majority of brand and marketing investment is going behind these 30 Power Brands and that will continue. Very importantly, this includes investment in digital to continue the strong momentum behind our dCommerce business, which grew 16% last year. Primarily, however, it is about stepping up execution and leveraging scale better. Hence, our brands, and especially the Power Brands, will benefit from two very important shifts we are making in the way that we develop, position and grow our brands in the future. First, we are using a highly rigorous and quantifiable process to completely change the way we think about and measure brand superiority.
Going forward, we will make our brands unmissably superior that is able to win not just on product superiority, but across multiple dimensions, all of them proven drivers of consumer preference. The evidence for this is compelling. It is something that we have validated in 29 strategic cells where, in each case, the correlation between improvements against our 6P methodology and stronger brand performance was clear. And this has given us the confidence to move rapidly to the next stage, setting baselines for ambitious goals and developing gap closing plans. For the 30 Power Brands, these will be in place by the end of the first half in 2024. The new unmissable superior framework will then be embedded in the second half and progress tracked against these goals.
