Final Results - Part 2

RNS Number : 3634V

Burberry Group PLC

28 May 2008

 



GROUP INCOME STATEMENT

	Note	Year to 31 March 2008 £m	Year to 31 March 2007 £m
Revenue	2	995.4	850.3
Cost of sales		(377.7)	(329.0)
Gross profit		617.7	521.3
Net operating expenses	3	(416.0)	(364.3)
Operating profit		201.7	157.0
Financing
Interest receivable and similar income	5	5.7	5.5
Interest payable and similar charges	5	(11.7)	(6.2)
Net finance charge	5	(6.0)	(0.7)
Profit before taxation	4	195.7	156.3
Taxation	6	(60.5)	(46.1)
Attributable profit for the year		135.2	110.2

The profit for the year is attributable to the equity holders of the Company and relates to continuing operations.

Earnings per share
- basic	7	31.3p	25.2p
- diluted	7	30.5p	24.7p
		£m	£m
Non-GAAP measures
Operating profit		201.7	157.0
Project Atlas costs	3	19.6	21.6
Treorchy closure costs	3	-	6.5
Relocation of Headquarters net profit	3	(15.1)	-
Adjusted operating profit		206.2	185.1
Adjusted earnings per share
- basic	7	32.4p	29.7p
- diluted	7	31.6p	29.1p
Dividends per share
- interim	8	3.35p	2.875p
- proposed final (not recognised as a liability at 31 March)	8	8.65p	7.625p

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

	Note	Year to 31 March  2008 £m	Year to 31 March  2007 £m
Cash flow hedges - (losses)/gains deferred in equity	17	(8.9)	9.1
Foreign currency translation differences	17	41.0	(28.9)
Net actuarial gains on defined benefit pension scheme	17	-	3.4
Restriction of asset on defined benefit pension scheme	17	(0.7)	(3.9)
Tax on items taken directly to equity	17	5.6	(1.5)
Net income/(expense) recognised directly in equity		37.0	(21.8)
Cash flow hedges - transferred to the income statement	17	(2.2)	(5.9)
Tax on items transferred from equity to the income statement	17	0.9	1.8
Net income/(expense) recognised directly in equity net of transfers		35.7	(25.9)
Attributable profit for the year	17	135.2	110.2
Total recognised income for the year	17	170.9	84.3

All the recognised income and expense for the year is attributable to the equity holders of the Company.  GROUP BALANCE SHEET

	Note	As at 31 March  2008 £m	As at 31 March   2007 £m
ASSETS
Non-current assets
Intangible assets		150.4	133.6
Property, plant and equipment	9	177.5	162.7
Deferred tax assets		29.5	24.6
Trade and other receivables	10	7.4	5.1
		364.8	326.0
Current assets
Inventories	11	268.6	149.8
Trade and other receivables	10	169.2	137.2
Derivative financial assets		11.0	5.3
Income tax receivables		12.0	-
Cash and cash equivalents	12	127.6	131.4
		588.4	423.7
Total assets		953.2	749.7
LIABILITIES
Non-current liabilities
Long term payables	13	(13.3)	(10.4)
Deferred tax liabilities		(4.3)	(10.2)
Retirement benefit obligations		(0.4)	(1.8)
Provisions	14	(3.7)	-
		(21.7)	(22.4)
Current liabilities
Bank overdrafts and borrowings	15	(191.8)	(134.2)
Derivative financial liabilities		(18.2)	(0.5)
Trade and other payables	16	(174.3)	(170.7)
Income tax liabilities		(51.9)	(25.0)
		(436.2)	(330.4)
Total liabilities		(457.9)	(352.8)
Net assets		495.3	396.9
EQUITY
Capital and reserves attributable to the Company's equity holders
Ordinary share capital	17	0.2	0.2
Share premium account	17	174.3	167.3
Capital reserve	17	26.6	26.0
Hedging reserve	17	(5.8)	1.8
Foreign currency translation reserve	17	37.8	(6.2)
Retained earnings	17	262.2	207.8
Total equity		495.3	396.9

GROUP CASH FLOW STATEMENT 

	Note	Year to 31 March  2008 £m	Year to 31 March  2007 £m
Cash flows from operating activities
Operating profit		201.7	157.0
Depreciation		28.9	25.9
Amortisation		3.8	1.8
Net impairment releases		(0.5)	(1.0)
(Profit)/loss on disposal of property, plant and equipment		(19.1)	1.1
Fair value losses on derivative instruments		(0.5)	-
Charges in respect of employee share incentive schemes		14.3	10.8
Increase in inventories		(122.6)	(33.4)
Increase in receivables		(29.1)	(33.8)
Increase in payables		28.8	32.8
Cash generated from operations		105.7	161.2
Interest received		4.8	4.6
Interest paid		(11.8)	(6.2)
Taxation paid		(53.3)	(45.8)
Net cash inflow from operating activities		45.4	113.8
Cash flows from investing activities
Purchase of tangible and intangible fixed assets		(48.5)	(34.3)
Proceeds from sale of property, plant and equipment		28.3	0.1
Payment of deferred consideration		(10.0)	(1.4)
Acquisition of subsidiary		-	(0.1)
Net cash outflow from investing activities		(30.2)	(35.7)
Cash flows from financing activities
Dividends paid in the year	8	(47.4)	(36.5)
Issue of ordinary share capital		0.5	0.6
Purchase of shares through share buy back	17	(39.6)	(62.2)
Sale of own shares by ESOPs	17	4.4	6.1
Purchase of own shares by ESOPs	17	(1.5)	-
Draw down on loan facility	17	49.0	10.0
Net cash outflow from financing activities		(34.6)	(82.0)
Net decrease in cash and cash equivalents		(19.4)	(3.9)
Effect of exchange rate changes on opening balances		7.0	(1.4)
Cash and cash equivalents at beginning of period		57.2	62.5
Cash and cash equivalents at end of period		44.8	57.2

ANALYSIS OF CASH AND CASH EQUIVALENTS

	Note	Year to 31 March  2008 £m	Year to 31 March 2007 £m
Cash and cash equivalents as per the balance sheet		127.6	131.4
Bank overdrafts	15	(82.8)	(74.2)
Cash and cash equivalents per the cash flow statement		44.8	57.2
Bank borrowings	15	(109.0)	(60.0)
Net debt		(64.2)	(2.8)

  NOTES TO THE FINANCIAL INFORMATION

1.       Basis of preparation

The financial information contained in this report has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. These financial statements do not constitute the Group's Annual Report and Accounts within the meaning of Section 240 of the Companies Act 1985.  

Statutory accounts for the year ended 31 March 2007 have been filed with the Registrar of Companies, and those for 2008 will be delivered in due course. The reports of the auditors on the statutory accounts for the year ended 31 March 2007 and 31 March 2008 were unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 237 of the Companies Act 1985. 

The principal accounting policies applied in the preparation of the consolidated financial statements are consistent with
those set out in the statutory accounts for 2006/07.

2.       Segmental analysis

Primary segment - analysis by origin

The Group's primary reporting segments are geographic based on where products or services are supplied to a third party or another segment. Europe comprises operations principally in the UK and also in France, Germany, Italy, Switzerland, Austria, Belgium, Czech Republic, Ireland and Netherlands. The Americas comprises operations in the USA. Asia Pacific comprises operations in Australia, Hong Kong, Japan, Korea, Malaysia, Singapore and Taiwan. This segmentation follows management organisation and reporting lines.

Revenue and profit before taxation - by origin of business

	Europe(1)			Spain			Americas			Asia Pacific			Total
Year to 31 March	2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m
Gross segment revenue	626.9	450.0(2)		193.9	177.6		231.6	192.6		226.5	214.4		1,278.9	1,034.6(2)
Inter-segment revenue	(262.4)	(179.3)(2)		(21.1)	(3.7)		-	-		-	(1.3)		(283.5)	(184.3)(2)
Revenue	364.5	270.7		172.8	173.9		231.6	192.6		226.5	213.1		995.4	850.3
Operating profit	134.6	104.1(2)		14.4	13.4		14.4	5.3(2)		38.3	34.2		201.7	157.0
Net finance charge													(6.0)	(0.7)
Profit before taxation													195.7	156.3
Taxation													(60.5)	(46.1)
Attributable profit for the year													135.2	110.2

(1)  Excludes Spain

(2)  Restated for the advanced pricing agreement in relation to internal sales between the UK and USA, previously under negotiation with the UK and USA Competent Authorities, which has been finalised in the period.

The results above are stated after the allocation of costs of a Group wide nature. Inter-segment revenue reflects the level of revenue between segments and is priced at arm's length.

Secondary segment - analysis by class of business 

	Retail			Wholesale			Total Retail and Wholesale			Licensing			Total
Year to 31 March	2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m		2008 £m	2007 £m
Gross segment revenue	484.4	410.1		589.5	498.8(1)		1,073.9	908.9(1)		84.8	86.1		1,158.7	995.0(1)
Inter-segment revenue	-	-		(163.3)	(144.7)(1)		(163.3)	(144.7)(1)		-	-		(163.3)	(144.7)(1)
Revenue	484.4	410.1		426.2	354.1		910.6	764.2		84.8	86.1		995.4	850.3
Other segmental items
Segment assets							640.1	470.3		14.0	6.5		654.1	476.8
Capital expenditure							50.3	38.7		-	0.1		50.3	38.8

(1) Restated for the advanced pricing agreement in relation to internal sales between the UK and USA, previously under negotiation with the UK and USA Competent Authorities, which has been finalised in the period.

The results above are stated after the allocation of costs of a Group wide nature.

2.    Segmental analysis (continued)

Additional information

Analysis of revenue is shown below as additional information:

Revenue by product	Year to  31 March  2008 £m	Year to  31 March  2007 £m
Womenswear	345.2	305.5
Menswear	247.8	227.0
Non-apparel	289.7	211.2
Other	27.9	20.5
Wholesale and Retail	910.6	764.2
Licensing	84.8	86.1
Total	995.4	850.3

Revenue by destination	Year to  31 March 2008 £m	Year to  31 March  2007 £m
Europe (1)	291.8	229.8
Spain	161.6	151.8
Americas	234.8	196.5
Asia Pacific	189.1	167.5
Rest of the World	33.3	18.6
Wholesale and Retail	910.6	764.2
Licensing	84.8	86.1
Total	995.4	850.3

(1) Excludes Spain

Number of directly operated stores, concessions and outlets open at 31 March

368

292

3.       Net operating expenses

	Year to  31 March 2008  £m	Year to  31 March 2007  £m
Distribution costs	(180.9)	(149.7)
Administrative expenses (excluding Atlas and Treorchy costs)	(234.7)	(185.5)
Project Atlas costs	(19.6)	(21.6)
Treorchy closure costs	-	(6.5)
Property rental income under operating leases	0.1	0.1
Profit/(loss) on disposal of property, plant and equipment	19.1	(1.1)
Total	(416.0)	(364.3)

Operating profit for the year to 31 March 2008 includes a charge of £19.6m (2007: £21.6m) relating to Project Atlas, our major infrastructure redesign initiative. This project is designed to create a substantially stronger platform to support long term operations and growth of the Group through the redesign of Burberry's business processes and systems. The total investment in Project Atlas charged over the three year period to 31 March 2008 to net operating expenses was £52.3m.

Included in operating profit for the year to 31 March 2008 is a net profit of £15.1m relating to the Group's plans to relocate their global headquarters later in the year. This net profit is represented by a profit on the sale of freehold property of £19.6m, the cost of accelerated depreciation of £0.9m and a provision for onerous leases as a result of the relocation for £3.6m.

  4.     Profit before taxation

	Year to  31 March  2008  £m	Year to  31 March  2007  £m
Profit before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment
- within cost of sales	3.1	1.5
- within distribution costs	3.2	3.2
- within administrative expenses	22.6	21.2
Amortisation of intangible assets (included in administrative expenses)	3.8	1.8
Fixed asset impairment charge relating to certain retail assets (included in administrative expenses)	1.2	-
Release of impairment charge relating to certain retail assets (included in administrative expenses)	(1.7)	(1.0)
(Profit)/loss on disposal of property, plant and equipment	(19.1)	1.1
Project Atlas costs	19.6	21.6
Treorchy closure costs	-	6.5
Employee costs	189.7	174.0
Operating lease rentals
- minimum lease payments	43.0	31.0
- contingent rents	32.3	17.1
Auditor's remuneration	2.8	2.8
Net exchange gain included in income statement	(2.9)	(0.6)
Net loss/(gain) on derivatives held for trading	0.4	(0.9)
Trade receivables net impairment charge/(reversal)	2.1	(0.5)

5.       Net finance charge

	Year to  31 March 2008  £m	Year to  31 March 2007  £m
Bank interest income	4.8	4.6
Other interest income	0.9	0.9
Interest receivable and similar income	5.7	5.5
Interest expense on bank loans and overdrafts	(11.0)	(6.2)
Loss on derivatives held for trading	(0.7)	-
Net finance charge	(6.0)	(0.7)

6.       Taxation

The actual effective rate of tax for the year ended 31 March 2008 was 30.9% (2007: 29.5% which included a 1.5% benefit relating to previous years as a result of the advanced pricing agreement in relation to internal sales between the UK and US. On an underlying basis the rate of tax was 31.0%).

  7.    Earnings per share 

The calculation of basic earnings per share is based on attributable profit for the year divided by the weighted average number of ordinary shares in issue during the year. Basic and diluted earnings per share based on adjusted operating profit are also disclosed to indicate the underlying profitability of Burberry Group. 

	Year to 31 March  2008 £m	Year to 31 March  2007 £m
Attributable profit for the year before Atlas costs, relocation of Headquarters and Treorchy costs	140.0	130.0
Effect of Atlas costs, relocation of Headquarters and Treorchy costs (after taxation)	(4.8)	(19.8)
Attributable profit for the year	135.2	110.2

The weighted average number of ordinary shares represents the weighted average number of Burberry Group plc ordinary shares in issue throughout the year, excluding ordinary shares held in Burberry Group's Employee share option plans ('ESOPs').

Diluted earnings per share is based on the weighted average number of ordinary shares in issue during the year. In addition, account is taken of any awards made under the share incentive schemes, which will have a dilutive effect when exercised.

	Year to 31 March 2008 Millions	Year to 31 March 2007 Millions
Weighted average number of ordinary shares in issue during the year	432.1	437.8
Dilutive effect of the share incentive schemes	10.7	8.3
Diluted weighted average number of ordinary shares in issue during the year	442.8	446.1

Basic earnings per share	Year to 31 March 2008 Pence	Year to 31 March 2007 Pence
Basic earnings per share before Atlas costs, relocation of Headquarters and Treorchy costs	32.4	29.7
Effect of Atlas costs, relocation of Headquarters and Treorchy costs	(1.1)	(4.5)
Basic earnings per share	31.3	25.2

Diluted earnings per share	Year to 31 March 2008 Pence	Year to 31 March 2007 Pence
Diluted earnings per share before Atlas costs, relocation of Headquarters and Treorchy costs	31.6	29.1
Effect of Atlas costs, relocation of Headquarters and Treorchy costs	(1.1)	(4.4)
Diluted earnings per share	30.5	24.7

 8.       Dividends

	Year to 31 March 2008 £m	Year to 31 March 2007 £m
Prior year final dividend paid 7.625p per share (2007: 5.5p)	33.0	24.0
Interim dividend paid 3.35p per share (2007: 2.875p)	14.4	12.5
Total	47.4	36.5

A final dividend in respect of the year to 31 March 2008 of 8.65p (2007: 7.625p) per share, amounting to £37.4m (2007: £33.0m), has been proposed for approval by the shareholders at the AGM subsequent to the balance sheet date. The final dividend has not been recognised as a liability at the year end and will be paid on 31 July 2008 to shareholders on the register at the close of business on 4 July 2008. 

9.       Property, plant and equipment

Cost	Freehold land  and buildings £m	Leasehold improvements £m	Fixtures, fittings and  equipment £m	Assets  in the course of  construction £m	Total £m
As at 1 April 2006	86.1	71.4	112.2	2.7	272.4
Effect of foreign exchange rate changes	(5.8)	(7.1)	(5.1)	(0.2)	(18.2)
Additions	0.3	11.3	17.8	4.8	34.2
Disposals	(0.1)	(2.1)	(7.6)	-	(9.8)
Reclassifications	-	0.6	1.4	(2.0)	-
As at 31 March 2007	80.5	74.1	118.7	5.3	278.6
Effect of foreign exchange rate changes	5.1	1.5	9.6	0.3	16.5
Additions	-	13.9	24.4	6.2	44.5
Disposals	(8.7)	(0.3)	(7.5)	-	(16.5)
Reclassifications	-	1.5	1.8	(3.3)	-
As at 31 March 2008	76.9	90.7	147.0	8.5	323.1

Accumulated depreciation
As at 1 April 2006	20.7	18.2	66.5	-	105.4
Effect of foreign exchange rate changes	(1.3)	(1.6)	(2.9)	-	(5.8)
Charge for the year	3.0	5.4	17.5	-	25.9
Impairment release on certain retail assets	-	(0.1)	(0.9)	-	(1.0)
Disposals	(0.1)	(1.4)	(7.1)	-	(8.6)
As at 31 March 2007	22.3	20.5	73.1	-	115.9
Effect of foreign exchange rate changes	2.1	0.7	5.8	-	8.6
Charge for the year	1.9	6.7	20.3	-	28.9
Net impairment charge/(release) on certain retail assets	-	0.5	(1.0)	-	(0.5)
Disposals	(2.3)	(0.3)	(4.7)	-	(7.3)
As at 31 March 2008	24.0	28.1	93.5	-	145.6
Net book value
As at 31 March 2008	52.9	62.6	53.5	8.5	177.5
As at 31 March 2007	58.2	53.6	45.6	5.3	162.7

During the year to 31 March 2008 a net impairment release of £0.5m (2007: £1m) was identified as part of the annual impairment review. This includes an impairment charge of £1.2m relating to certain retail stores in the USA where trading conditions are becoming more challenging. It is offset by a £1.7m release due to improved trading conditions on previously impaired stores in Europe.

The impairment release was based on a review of the value of the assets in use and on pre-tax cash flows attributable to these assets in accordance with IAS 36 'Impairment of Assets'. Pre-tax cash flow projections are based on financial plans approved by management and extrapolated beyond the budget year to the anticipated lease exit dates using growth rates and inflation rates appropriate to each country's economic conditions. The pre-tax discount rate used in these calculations was 13.8%. 

Based on a valuation report prepared by Colliers Conrad Ritblat Erdman, dated 16 May 2006, the existing use value of Burberry Group's nine most significant freehold properties is £136.9m (based on closing exchange rates at 31 March 2008). This valuation is higher than the net book value of these assets. The directors do not intend to incorporate this valuation into the accounts but set out the valuation for information purposes only.

10.  Trade and other receivables

	As at  31 March  2008 £m	As at  31 March  2007 £m
Non-current
Deposits and prepayments	7.4	5.1
Total non-current trade and other receivables	7.4	5.1
Current
Trade receivables	141.3	114.7
Provision for doubtful debts	(5.0)	(3.5)
Net trade receivables	136.3	111.2
Other receivables	13.3	9.4
Prepayments and accrued income	19.6	16.6
Total current trade and other receivables	169.2	137.2
Total trade and other receivables	176.6	142.3

The principal non-current receivable of £4.0m is due within five years from the balance sheet date, with the remainder due at various stages after this. Of the total non-current receivables, £0.7m bears interest at local market rates. The remainder is non-interest bearing.

As at 31 March 2008, trade receivables of £7.1m (2007: £7.5m) were impaired. The amount of the provision was £5.0m as of 31 March 2008 (2007: £3.5m). The individually impaired receivables relate to balances with trading parties which have passed their payment due dates. It was assessed that in some instances a portion of the receivables is expected to be recovered. The ageing of these overdue receivables is as follows:

	As at  31 March  2008 £m	As at  31 March  2007 £m
Less than 1 month overdue	0.2	4.2
1 to 3 months overdue	3.5	0.5
Over 3 months overdue	3.4	2.8
	7.1	7.5

As at 31 March 2008, trade receivables of £19.7m (2007: £1.0m) were overdue but not impaired. The ageing of these overdue receivables is as follows:

	As at  31 March  2008 £m	As at  31 March  2007 £m
Less than 1 month overdue	5.3	0.8
1 to 3 months overdue	14.4	0.2
Over 3 months overdue	-	-
	19.7	1.0

Movement on the provision for doubtful debts is as follows:

	Year to  31 March  2008 £m	Year to  31 March 2007 £m
At 1 April	3.5	4.2
Increase in provision for doubtful debts	2.2	0.8
Receivables written off during the year as uncollectable	(0.6)	(0.2)
Unused provision reversed	(0.1)	(1.3)
As at 31 March	5.0	3.5

  10.    Trade and other receivables (continued)

Within the other classes of trade and other receivables there are £5.1m (2007: £4.6m) of fully impaired receivables. The maximum exposure to credit risk at the reporting date with respect to trade receivables is the carrying amount on the Balance Sheet. The Group does not hold any collateral as security.

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

	Year to  31 March  2008 £m	Year to  31 March 2007 £m
Sterling	26.9	33.9
US Dollar	21.1	12.6
Euro	109.0	82.2
Other currencies	19.6	13.6
	176.6	142.3

The nominal value less impairment provision of trade and other receivables are assumed to approximate their fair value because of the short maturity of these instruments.

11.       Inventories

	As at  31 March  2008 £m	As at  31 March  2007 £m
Raw materials	25.0	17.7
Work in progress	5.5	5.9
Finished goods	238.1	126.2
Total inventories	268.6	149.8

	As at  31 March  2008 £m	As at  31 March  2007 £m
Cost of inventories recognised as an expense during the year	376.3	333.5
Inventories physically destroyed in the year	1.6	1.1
Reversal during the year of previous inventory write downs	(0.2)	(5.6)
Total cost of sales	377.7	329.0

The reversal during the year of the previous write down of inventories was considered appropriate as a result of the changes in market conditions. 

12.       Cash and cash equivalents

	As at  31 March 2008 £m	As at  31 March 2007 Restated £m
Cash at bank and in hand	127.6	117.1
Short term deposits	-	14.3(1)
Total	127.6	131.4

(1)  After reclassification of a £45.1 cash pool account from short term deposits to cash at bank.

The effective interest rate on short term deposits during the year was 5.1% (2007: 3.6%). These deposits had an average maturity of nine days (2007: 28 days). The effective interest rate is the weighted average annual interest rate for the Group based on local market rates on short term deposits. 

The fair value of short term deposits approximates the carrying amount because of the short maturity of this instrument.

13.       Long term payables

	As at  31 March  2008 £m	As at  31 March 2007 £m
Unsecured:
Other creditors, accruals and deferred income	13.3	10.4
Total	13.3	10.4

The maturity of long term liabilities, all of which do not bear interest, is as follows:

	As at  31 March  2008 £m	As at  31 March  2007 £m
Between one and two years	2.6	1.9
Between two and three years	1.5	1.0
Between three and four years	1.3	0.9
Between four and five years	1.4	0.8
Over five years	6.5	5.8
Total	13.3	10.4

The fair value of long term liabilities approximate their carrying amounts.

14.     Provisions 

	Property obligations £m
As at 1 April 2007	-
Created during the year	3.7
As at 31 March 2008	3.7

These provisions have arisen from leasehold obligations which the Group expect will be utilised within one to three years. 

15.    Bank overdrafts and borrowings

	As at  31 March 2008 £m	As at  31 March 2007 £m
Unsecured:
Bank overdrafts	82.8	74.2
Bank borrowings	109.0	60.0
Total	191.8	134.2

Bank overdrafts represent balances on cash pooling arrangements in the Group. The effective interest rate for the overdraft balances is 3.2% (2007: 4.5%).

A £200m five year multi-currency revolving facility was agreed with a syndicate of third party banks commencing on 30 March 2005. At 31 March 2008, the amount drawn down was £109m (2007: £60m). This drawdown was made in Sterling. Interest is charged on this loan at LIBOR plus 0.325% per annum on drawings less than £100m and at LIBOR plus 0.375% per annum on drawings over £100m. The borrowing matures on 30 March 2010. The undrawn facility at 31 March 2008 was £91m (2007: £140m).

As part of the Group's obligations under its revolving credit facility Burberry (Wholesale) Limited (US) and Burberry Limited (US) were introduced as a guarantor to the facility during the year.

The fair value of borrowings and overdrafts approximate to the carrying amount because of the short maturity of these instruments.

  16.    Trade and other payables

	As at  31 March 2008 £m	As at  31 March 2007 £m
Unsecured:
Trade creditors	62.5	56.8
Other taxes and social security costs	5.2	6.4
Other creditors	19.1	19.4
Accruals and deferred income	87.5	78.1
Deferred consideration for acquisitions	-	10.0
Total	174.3	170.7

Deferred consideration arising on the acquisition of the Burberry business in Korea was fully paid during the year.

The nominal value of trade and other payables are assumed to approximate their fair value because of the short maturity of these instruments.

17.    Share capital and reserves

Authorised share capital	2008 £m	2007 £m
1,999,999,998,000 (2007: 1,999,999,998,000) Ordinary Shares of 0.05p (2007: 0.05p) each	1,000.0	1,000.0
1,600,000,000 redeemable preference shares of 0.05p (2007: 0.05p) each	0.8	0.8
Total	1,000.8	1,000.8
Allotted, called up and fully paid share capital	Number	£m
Ordinary shares of 0.05p (2007: 0.05p) each
As at 1 April 2007	437,779,382	0.2
Allotted on exercise of options during the year	1,081,064	-
Cancelled on repurchase of own shares	(6,198,167)	-
As at 31 March 2008	432,662,279	0.2

17.    Share capital and reserves (continued)

Statement of changes in shareholders' equity

	Ordinary share  capital £m	Share  premium account  £m	Hedging reserve £m	Foreign  currency  translation  reserve £m	Capital  reserve £m	Retained  earnings £m	Total  equity £m
Balance as at 1 April 2006	0.2	151.8	(0.2)	21.2	25.8	187.8	386.6
Cash flow hedges - losses deferred in equity	-	-	9.1	-	-	-	9.1
Foreign currency translation differences	-	-	-	(28.9)	-	-	(28.9)
Net actuarial gains on defined benefit pension scheme	-	-	-	-	-	3.4	3.4
Restriction of asset on defined benefit pension scheme	-	-	-	-	-	(3.9)	(3.9)
Tax on items taken directly to equity	-	-	(3.0)	1.5	-	-	(1.5)
Net income/(expense) recognised directly in equity	-	-	6.1	(27.4)	-	(0.5)	(21.8)
Cash flow hedges - transferred to the income statement	-	-	(5.9)	-	-	-	(5.9)
Tax on items transferred from equity	-	-	1.8	-	-	-	1.8
Attributable profit for the year	-	-	-	-	-	110.2	110.2
Total recognised income/(expenses) for the year	-	-	2.0	(27.4)	-	109.7	84.3
Employee share option scheme
- value of share options granted	-	-	-	-	-	10.8	10.8
- tax on share options granted	-	-	-	-	-	7.2	7.2
- exercise of share options	-	15.5	-	-	-	-	15.5
- price differential on exercise of shares	-	-	-	-	-	(14.9)	(14.9)
Share buy back costs	-	-	-	-	-	(62.2)	(62.2)
Sale of shares by ESOPs	-	-	-	-	-	6.1	6.1
Transfer between reserves	-	-	-	-	0.2	(0.2)	-
Dividend paid in the year	-	-	-	-	-	(36.5)	(36.5)
Balance as at 31 March 2007	0.2	167.3	1.8	(6.2)	26.0	207.8	396.9
Cash flow hedges - gains deferred in equity	-	-	(8.9)	-	-	-	(8.9)
Foreign currency translation differences	-	-	-	41.0	-	-	41.0
Restriction of asset on defined benefit pension scheme	-	-	-	-	-	(0.7)	(0.7)
Tax on items taken directly to equity	-	-	2.6	3.0	-	-	5.6
Net income/(expense) recognised directly in equity	-	-	(6.3)	44.0	-	(0.7)	37.0
Cash flow hedges - transferred to the income statement	-	-	(2.2)	-	-	-	(2.2)
Tax on items transferred from equity	-	-	0.9	-	-	-	0.9
Attributable profit for the year	-	-	-	-	-	135.2	135.2
Total recognised income/(expenses) for the year	-	-	(7.6)	44.0	-	134.5	170.9
Employee share option scheme
- value of share options granted	-	-	-	-	-	14.3	14.3
- tax on share options granted	-	-	-	-	-	(3.2)	(3.2)
- exercise of share options	-	7.0	-	-	-	-	7.0
- price differential on exercise of shares	-	-	-	-	-	(6.5)	(6.5)
Share buy back costs	-	-	-	-	-	(39.6)	(39.6)
Sale of shares by ESOPs	-	-	-	-	-	4.4	4.4
Purchase of shares by ESOPs	-	-	-	-	-	(1.5)	(1.5)
Transfer between reserves	-	-	-	-	0.6	(0.6)	-
Dividend paid in the year	-	-	-	-	-	(47.4)	(47.4)
Balance as at 31 March 2008	0.2	174.3	(5.8)	37.8	26.6	262.2	495.3

During the year to 31 March 2008, the Company repurchased and subsequently cancelled 6,198,167 ordinary shares, representing 1.4% of the issued share capital, at a total cost of £39.6m. The nominal value of the shares was £3,099 which was transferred to a capital redemption reserve. Retained earnings were reduced by £39.6m. The share repurchase programme commenced in January 2005 and since then a total of 79,063,397 ordinary shares have been repurchased and subsequently cancelled. This represents 15.8% of the original issued share capital at a total cost of £351.8m. The nominal value of the shares was £39,532 and has been transferred to a capital redemption reserve and the retained earnings have been reduced by £351.8m since this date.

17.    Share capital and reserves (continued)

The cost of own shares held in the Burberry Group ESOP Trusts has been offset against the profit and loss account, as the amounts paid reduce the profits available for distribution by the Burberry Group and the Company. As at 31 March 2008 the amount offset against this reserve are £4.9m (2007: £9.2m). In the year to 31 March 2008 the Burberry Group plc ESOP Trust has waived its entitlement to dividends of £0.3m (2007: £0.4m).

During the year profits of £0.6m (2007: £0.2m) have been transferred to capital reserves due to statutory requirements of subsidiaries.

18.    Capital commitments

	As at  31 March  2008 £m	As at  31 March  2007 £m
Capital commitments contracted but not provided for
- property, plant and equipment	1.5	2.5
- intangible assets	0.1	0.1
Total	1.6	2.6

Contracted capital commitments represent contracts entered into by the year end and future work in respect of major capital expenditure projects where activity has commenced by the year end relating to property, plant and equipment and intangible assets.

19.    Contingent liabilities

Since 31 March 2007 the following changes to material contingent liabilities have occurred:

Under the terms of a Demerger Agreement, entered into with GUS plc on 13 December 2005, Burberry continued to participate in the Experian Pension Scheme until 31 December 2007. Under this scheme Burberry was jointly and severally liable with the other participating GUS companies for the deficit in this scheme. Burberry was required to pay any debt due under Section 75 or 75A of the Pensions Act 1995. This debt has been determined to be £1.25m and was settled in April 2008. 

Other material contingent liabilities reported at 31 March 2007 remain unchanged and were:

Under the GUS group UK tax payment arrangements, the Group was jointly and severally liable for any GUS liability attributable to the period of Burberry Group's membership of this payment scheme. Burberry Group's membership of this scheme was terminated with effect from 31 March 2002. 

Burberry (Spain) S.A. is liable for certain salary and social security contributions left unpaid by its sole contractors where the amounts are attributable to the period in which subcontracting activity is undertaken on behalf of Burberry (Spain) S.A. It is not feasible to estimate the amount of contingent liability, but such expense has been minimal in prior years.

During the year ended 31 March 2008, Burberry Group has provided guarantee letters to certain raw material suppliers. The total value of these guarantees, which expire on 30 September 2008, amount to £0.4m at 31 March 2008 (2007: £1.1m).

20.    Related party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. The only related party transactions relate to total compensation paid to key management, who are defined as the Board of Directors. With effect from 1 April 2007 certain members of senior management have been included under the definition of key management personnel. The total compensation paid during the year was as follows:

	Year to 31 March 2008 £m	Year to  31 March 2007 £m
Salaries and short term benefits	8.4	6.2
Post-employment benefits	0.4	0.5
Share based compensation	4.5	2.3
Total	13.3	9.0

In addition, aggregate gains on the exercise of options in the year to 31 March 2008 were £4.4m (2007: £14.2m).

 21.    Foreign currency translation

Translation of the results of overseas businesses

The results of overseas subsidiaries are translated into the Group's presentation currency of Sterling each month at the weighted average exchange rate for the month according to the phasing of the Group's trading results. The weighted average exchange rate is used, as it is considered to approximate the actual exchange rates on the date of the transactions. The assets and liabilities of such undertakings are translated at the year end exchange rates. Differences arising on the retranslation of the opening net investment in subsidiary companies, and on the translation of their results, are taken directly to the foreign currency translation reserve within equity. 

The principal exchange rates used were as follows:

	Weighted average profit rate		Closing rate
	Year to 31 March 2008	Year to 31 March 2007	Year to 31 March 2008	Year to 31 March 2007
Euro	1.42	1.49	1.26	1.47
US dollar	2.02	1.91	1.98	1.97
Hong Kong dollar	15.63	14.80	15.44	15.38
Korean won	1,873	1,801	1,966	1,851

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

The average exchange rate achieved by Burberry Group on its Yen royalty income, taking into account its use of Yen forward sale contracts on a monthly basis approximately 12 months in advance of royalty receipts, was Yen 221.5: £1 in the year to 31 March 2008 (2007: Yen 199.2: £1).

22.       Non-GAAP measures

Non-GAAP measures are presented in order to provide a clear and consistent presentation of the underlying performance of the Group's ongoing business. 

 

END

 

 

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