Interim Results - Part 2

RNS Number : 3430I

Burberry Group PLC

18 November 2008

Notes to the Consolidated Financial Statements (Continued)

10. Trade and other receivables

	As at 30 September 2008 £m	As at 30 September 2007 £m	As at 31 March 2008 £m
Non-current
Deposits and prepayments	8.3	6.3	7.4
Total non-current trade and other receivables	8.3	6.3	7.4
Current
Trade receivables	154.8	131.3	136.3
Other receivables	16.5	15.1	13.3
Prepayments and accrued income	25.3	14.7	19.6
Total current trade and other receivables	196.6	161.1	169.2
Total	204.9	167.4	176.6

11. Trade and other payables

	As at 30 September 2008 £m	As at 30 September 2007 £m	As at 31 March 2008 £m
Non-current
Other payables, accruals and deferred income	16.4	12.3	13.3
Total non-current trade and other payables	16.4	12.3	13.3
Current
Trade payables	70.5	55.2	62.5
Other taxes and social security costs	7.7	8.5	5.2
Other payables	20.0	17.6	19.1
Accruals and deferred income	69.6	71.8	87.5
Total current trade and other payables	167.8	153.1	174.3
Total	184.2	165.4	187.6

12. Provisions

	As at 30 September 2008 £m	As at 30 September 2007 £m	As at 31 March 2008 £m
As at 1 April	3.7	-	-
Created in the period	-	3.6	3.7
As at end of period	3.7	3.6	3.7

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

13. Bank overdrafts and borrowings

	As at 30 September 2008 £m	As at 30 September 2007 £m	As at 31 March 2008 £m
Unsecured
Bank overdrafts	129.2	40.7	82.8
Bank borrowings	143.5	146.5	109.0
Total	272.7	187.2	191.8

Bank overdrafts represent balances on cash pooling arrangements in the Group.

A £200m five year multi-currency revolving facility was agreed with a syndicate of third party banks commencing on 30 March 2005. At 30 September 2008, the amount drawn down was £143.5m (2007: £146.5m). This drawdown was made in Sterling and US dollars. The undrawn facility at 30 September 2008 was £56.5m (2007: £53.5m).

On the 13 June 2008 an additional three year credit facility of £60m was agreed with two of the Company's existing relationship banks. As at 30 September 2008 the facility remained unutilised.

14. Share capital and reserves

	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 2007	0.2	167.3	1.8	(6.2)	26.0	207.8	396.9
Cash flow hedges - gains deferred in equity	-	-	1.3	-	-	-	1.3
Foreign currency translation differences	-	-	-	0.1	-	-	0.1
Net actuarial loss on defined benefit pension scheme	-	-	-	-	-	(0.4)	(0.4)
Tax on items taken directly to equity	-	-	(0.4)	1.1	-	-	0.7
Net income/(expense) recognised directly in equity	-	-	0.9	1.2	-	(0.4)	1.7
Cash flow hedges - transferred to the income statement	-	-	(3.2)	-	-	-	(3.2)
Tax on items transferred from equity	-	-	1.1	-	-	-	1.1
Attributable profit for the period	-	-	-	-	-	66.1	66.1
Total recognised (expense)/income for the period	-	-	(1.2)	1.2	-	65.7	65.7
Transfer between reserves	-	-	-	-	0.6	(0.6)	-
Employee share option scheme
- value of share options granted	-	-	-	-	-	7.1	7.1
- tax on share options granted	-	-	-	-	-	0.1	0.1
- exercise of share options	-	6.7	-	-	-	-	6.7
- price differential on exercise of shares	-	-	-	-	-	(6.3)	(6.3)
Share buy back costs	-	-	-	-	-	(39.5)	(39.5)
Sale of own shares by ESOPs	-	-	-	-	-	4.2	4.2
Dividend paid in the period	-	-	-	-	-	(32.9)	(32.9)
Balance as at 30 September 2007	0.2	174.0	0.6	(5.0)	26.6	205.6	402.0

Balance as at 1 April 2008	0.2	174.3	(5.8)	37.8	26.6	262.2	495.3
Cash flow hedges - gains deferred in equity	-	-	(3.4)	-	-	-	(3.4)
Foreign currency translation differences	-	-	-	17.8	-	-	17.8
Tax on items taken directly to equity	-	-	1.0	(1.8)	-	-	(0.8)
Net (expense)/income recognised directly in equity	-	-	(2.4)	16.0	-	-	13.6
Cash flow hedges - transferred to the income statement	-	-	8.9	-	-	-	8.9
Tax on items transferred from equity	-	-	(2.5)	-	-	-	(2.5)
Attributable profit for the period	-	-	-	-	-	74.8	74.8
Total recognised income for the period	-	-	4.0	16.0	-	74.8	94.8
Transfer between reserves	-	-	-	-	0.6	(0.6)	-
Employee share option scheme
- value of share options granted	-	-	-	-	-	1.3	1.3
- tax on share options granted	-	-	-	-	-	(1.7)	(1.7)
- exercise of share options	-	1.2	-	-	-	-	1.2
- price differential on exercise of shares	-	-	-	-	-	(6.9)	(6.9)
Purchase of own shares by ESOPS	-	-	-	-	-	(5.4)	(5.4)
Sale of own shares by ESOPs	-	-	-	-	-	5.8	5.8
Dividend paid in the period	-	-	-	-	-	(37.2)	(37.2)
Balance as at 30 September 2008	0.2	175.5	(1.8)	53.8	27.2	292.3	547.2

During the six months to 30 September 2008, no ordinary shares were repurchased and cancelled by the Company. 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 reserve and the retained earnings have been reduced by £351.8m since this date.

14. Share capital and reserves (continued)

The cost of own shares held in the Burberry Group ESOP Trusts has been offset against retained earnings, as the amounts paid reduce the profits available for distribution by the Burberry Group and the Company. As at 30 September 2008 the amount offset against this reserve was £4.5m (2007: £4m).

Options exercised during the first half to 30 September 2008 resulted in 266,418 shares being issued (2007: 1,030,282). These options had no exercise price (exercise proceeds received in 2007: £6.7m). The related weighted average price at the time of exercise was £4.56 (2007: £6.52) per share.

15. Contingent liabilities

There have been no material changes to the Group’s contingent liabilities since 31 March 2008.

16. Business combinations

On 30 September 2008 the Group formed Burberry Middle East LLC, a company registered in the United Arab Emirates, with its longstanding franchisee in the Middle East, The Jashanmal Group. Burberry Middle East will manage all Burberry retail and wholesale distribution within the United Arab Emirates markets of Dubai and Abu Dhabi, as well as Qatar, Oman and Kuwait.

Burberry has a 49% interest in the issued share capital of the joint venture and a 59% interest in profits generated by this business. Burberry has the power to appoint the majority of the directors. Burberry Middle East has been consolidated as a subsidiary as at 30 September 2008. The minority interest in the consolidated net assets of this company has been identified as a separate component of equity.

On 30 August 2008, the Group also terminated its franchisee agreement in Guam, an island in the Western Pacific Ocean, and incorporated a new company Burberry Guam Inc which acquired the Burberry retailing business from the terminated franchisee in Guam. This business contributed revenues of £0.1m to the Group for the period from acquisition to 30 September 2008.

If both the business combinations had occurred on 1 April 2008, consolidated revenue and consolidated profit for the six months ended 30 September 2008 would have been benefited by £9.8m and £1.3m respectively.

Details of the net assets acquired and goodwill are as follows:

	£m
Cash paid	1.4
Direct costs relating to the acquisition	0.3
Total purchase consideration	1.7
Provisional fair value of net identifiable assets acquired	(2.2)
Provisional goodwill	(0.5)
Provisional goodwill is represented by:
- Provisional negative goodwill	(1.7)
- Provisional positive goodwill	1.2

The negative goodwill of £1.7m arising on the Burberry Middle East LLC combination has been recognised within operating expenses for the period and is attributable to the excess of the net assets acquired over the cost of the acquisition. Positive goodwill of £1.2m arose on Burberry Guam Inc combination and is included in intangible assets. This is attributable to the acquisition of the distribution rights and the benefits expected from further expansion in this region.

The provisional fair value of assets acquired approximates the carrying values in the acquiree’s records immediately prior to the acquisition. Included in these assets is inventory (£4.5m), property, plant and equipment (£1.5m), accounts receivable (£1.1m), accounts payable (£2.8m) and minority interest (£2.1m). The fair values are provisional due to the proximity of the acquisition dates to the period end.

17. Related party disclosures

The Group’s significant related parties are disclosed in the Annual Report for the year ended 31 March 2008. There were no material changes to these related parties in the period. No material related party transactions have taken place during the first six months of the current financial year.

18. Foreign currency

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 period 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 dates of the transactions. The assets and liabilities of such undertakings are translated at period 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:

	Average
	Six months to 30 September 2008	Six months to 30 September 2007	Year to 31 March 2008
Euro	1.26	1.47	1.42
US dollar	1.93	2.00	2.02
Hong Kong dollar	15.05	15.67	15.63
Korean won	2,008	1,861	1,873

	Closing
	As at 30 September 2008	As at 30 September 2007	As at 31 March 2008
Euro	1.26	1.43	1.26
US dollar	1.78	2.05	1.98
Hong Kong dollar	13.83	15.92	15.44
Korean won	2,149	1,873	1,966

The average exchange rate achieved by Burberry Group on its Yen licensing 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 223.2: £1 in the six months to 30 September 2008 (2007: Yen 220.7: £1; Year to 31 March 2008: Yen 221.5: £1).

Statement of Directors' Responsibilities

The directors confirm to the best of their knowledge that this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and that the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:

–an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

–material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors of Burberry Group plc are listed in the Burberry Group plc Annual Report for the year ended 31 March 2008. A list of current directors is maintained on the Burberry Group website: www.burberryplc.com.

By order of the Board

John Peace
Chairman
17 November 2008

Stacey Cartwright
Chief Financial Officer
17 November 2008

Independent Review Report to Burrberry Group PLC

Introduction

We have been engaged by the company to review the interim financial information in the half-yearly financial report (‘interim report’) for the six months ended 30 September 2008, which comprises the Condensed Group Income Statement, Condensed Group Balance Sheet, Condensed Group Statement of Recognised Income and Expense, Condensed Group Cash Flow Statement and the related notes on pages 20 to 28. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

Directors’ responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
17 November 2008
London

(a) The maintenance and integrity of the Burberry Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial report since it was initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

Shareholder Information

Registrar

Any enquiries relating to your shareholding, for example transfers of shares, change of name or address, amalgamation of share accounts, lost share certificates or dividend cheques, should be referred to the Company’s Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, telephone: 0871 384 2839 (or +44 121 415 7047 from outside the UK).

In addition, Equiniti offer a range of shareholder information online at www.shareview.co.uk. A textphone facility for those with hearing difficulties is available by calling: 0871 384 2266 (or +44 121 415 7028 from outside the UK).

Amalgamating share accounts

Shareholders who have more than one account due to inconsistency in the name and address details may avoid duplicate mailings by asking the Registrar to amalgamate their holdings.

Dividends

The interim dividend of 3.35p per share will be paid on 29 January 2009 to shareholders on the register at the close of business on 5 January 2009.

Dividend Reinvestment Plan

The Group’s Dividend Reinvestment Plan (DRIP) enables shareholders to use their cash dividends to buy further shares in the Company. Full details of the DRIP can be obtained from the Registrars. If you would like your interim and future dividends to qualify for the DRIP, completed application forms must be returned by 15 January 2009.

Electronic Communication

Shareholders may at any time choose to receive all shareholder documentation in electronic form via the internet, rather than through the post in paper format. Shareholders who decide to register for this option will receive an email each time a statutory document is published on the internet. Shareholders who wish to receive documentation in electronic form should register at www.shareview.co.uk.

ShareGift

Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating their shares to charity through ShareGift, a donation scheme operated by The Orr Mackintosh Foundation (registered charity 1052686). A ShareGift donation form can be obtained from Equiniti Limited. Further information is available at www.sharegift.org or by telephone on
+44 (0) 20 7930 3737.

Company Website

This Interim Report and other information on Burberry including share price information and results announcements, is available via the internet on the Group’s website at www.burberryplc.com.

Financial calendar
Interim dividend record date	5 January 2009
Third quarter interim management statement	January 2009
Interim dividend payment	29 January 2009
Second half trading update	April 2009
Preliminary results announcement for the year ended 31 March 2009	May 2009
Annual General Meeting	July 2009