Interim Results
Burberry Group PLC
16 November 2004
Burberry Group plc
Interim Results
16 November 2004. Burberry Group plc reports interim results for its first half
to 30 September 2004.
Financial Highlights
•Total revenues increased 14% on an underlying* basis to £347 million
- Retail revenues increased 12% underlying
- Wholesale revenues increased 13% underlying
- Licensing revenue increased 31% underlying
•Gross profit margin expanded from 55.6% to 58.6%
•EBITA** increased 18% (22% underlying) to £78.8m
•EBITA margin expanded from 20.8% to 22.7%
•Diluted EPS before goodwill amortisation and exceptional gain increased
20% to 10.8p
•Interim dividend increased 33% to 2.0p per Ordinary Share
Strategic and Operating Highlights
•Retail expansion on track with opening of 3 stores and one concession
•Completed important store renovations
•Renewing selected licences in Japan
•Burberry Brit for Men fragrance launched to outstanding consumer response
•New fragrance licence to result in increased royalty rates and marketing
commitment
Share Repurchase Programme
•Burberry announces share repurchase programme
Summary of Results
Six months to
30 September % change
2004 2003 Reported Underlying
£m £m
------ ------ -------- ----------
Turnover 347.5 321.3 8 14
Operating profit before goodwill
amortisation and exceptional gain
(EBITA) 78.8 66.9 18 22
Exceptional gain 0.8 - - -
Operating profit 76.3 63.4 20 25
Profit after taxation 52.3 41.9 25 29
Diluted EPS before goodwill
amortisation and exceptional gain 10.8p 9.0p 20 -
Diluted EPS 10.3p 8.3p 24 -
---------------------------------- ------ ------ ------- --------
* Underlying figures are calculated at constant exchange rates.
** EBITA represents profit before interest, taxation, goodwill amortisation and
exceptional gain.
John Peace, Chairman of Burberry, commenting on the interim results: 'In the
context of out-performance since the July 2002 IPO, a strong balance sheet and
attractive future growth opportunities, Burberry is announcing today a
significant share repurchase programme designed to enhance the capital
efficiency of the business and benefit all shareholders.'
Rose Marie Bravo, Chief Executive, stated, 'Burberry delivered a strong first
half performance driven by the continued execution of our core strategies and
the balance of our business across product categories, channels and regions. We
were particularly pleased by the continued operating margin improvement, leading
to a 20% EPS increase.'
Management will discuss these results during a presentation to analysts and
institutions at 1:00pm today at Merrill Lynch Financial Centre, The Auditorium,
100 Newgate Street, London EC1A 1HQ (telephone +44 (0) 20 7404 5959). The
presentation will also be broadcast live on the Internet at www.burberryplc.com
and can be accessed by telephone at +44 (0) 870 411 6989 (UK) and +1 800 890
8202 (US). Replay: +44 (0) 20 7081 9440, access number 020270.
Enquiries:
Burberry 020 7968 0577
Stacey Cartwright CFO
Matt McEvoy Strategy and IR
John Scaramuzza Strategy and IR
Brunswick 020 7404 5959
Susan Gilchrist
Laura Cummings
Robert Gardener
Certain statements made in this announcement are forward looking statements.
Such statements are based on current expectations and are subject to a number of
risks and uncertainties that could cause actual results to differ materially
from any expected future results in forward looking statements.
This announcement does not constitute an invitation to underwrite, subscribe for
or otherwise acquire or dispose of any Burberry Group plc shares. Past
performance is not a guide to future performance and persons needing advice
should consult an independent financial adviser.
Chief Executive's Review
Burberry delivered a strong performance in the first half. The Group increased
diluted EPS (before goodwill amortisation and exceptional gain) by 20% on a 14%
underlying* revenue increase. Progress on important strategic and operational
priorities contributed to these gains while also providing the basis for future
advances. At the same time, these results reflect both the balance and diversity
of the Group's business across products, channels and regions.
Strategic and operating progress
Key strategic and operating highlights are included below:
Products. Burberry enjoyed progress across its major product categories.
•Womenswear. Achieving 18% underlying revenue growth, womenswear led the
product groups in the half. The Group continues to introduce contemporary
designs to good consumer response. The Autumn/Winter 2004 London collection
featured advanced fabrications and new outerwear silhouettes. Womenswear
comprised 34% of total revenue.
•Menswear. At 27% of reported revenue, menswear sales were bolstered by
the sartorial dressing trend with tailored clothing and related categories
particularly strong performers. Menswear achieved 7% underlying revenue
growth in the half.
•Accessories. New products drove accessories' 11% underlying revenue
growth in the period. Small leather goods, which included an innovative mix
of new styles and designs, and an expanded line of ponchos were important
contributors to these gains. Accessories comprised 25% of revenue in the
period (excludes childrenswear).
•Fragrance. Burberry Brit for men launched in the US and selected European
markets to outstanding consumer response. The contribution of this latest
addition to the Brit family combined with strength of existing fragrance
lines drove the category's strong gains in the half.
Channels. The Group continued to execute its core retail, wholesale and
licensing strategies.
•Retail. Burberry's retail expansion continued on plan. As part of this
investment, several key stores underwent refurbishment activity in
preparation for peak autumn and holiday selling periods. Work had been
completed in the New York flagship by the end of the period, with the Boston
(phase 1), the San Francisco and Paris renovations completed early in the
third quarter. During the half, the Group opened three new stores in the US
and a concession in Korea. On a year-over-year basis, total selling space
increased approximately 10%. Management also finalised preparations for
Burberry's important Rome location which commenced trading in mid-October.
•Wholesale. In wholesale, Burberry continued to concentrate on key
accounts, add doors selectively in developed markets and utilise the channel
to develop new businesses and markets. In Spain, for example, the three test
conversions of a wholesale customer's accessories areas to Group-operated
concessions continued to perform well; these concessions are an important
element in the Group's efforts to broaden its accessory business in this
market and additional conversions are scheduled for spring 2005.
•Licensing. Burberry announced a new fragrance licence with its existing
partner during the half. The terms of the new agreement provide for a
substantially enhanced royalty rate and marketing investment on the part of
our licensing partner relative to the previous agreement. The new agreement
also defines an organisational structure more aligned with Burberry's
requirements, which will enable future development of this highly successful
business.
Regions. Burberry achieved good results across its trading regions during the
half.
•Japan. Burberry continued its programme to enhance brand positioning in
Japan during the half. With respect to licences outside the core apparel
categories, the Group began the process of renewing selected licences,
including home products, custom shirts and golf accessories. If completed,
these renewals are expected to include phased increases in royalty rates and
marketing commitments. The Group will also continue to restrict the
distribution of selected categories in this market. Further, Burberry plans
to enter into short-term licence extensions for ties, leather goods and
related accessories with the objective of retaining flexibility as the Group
considers the optimal means to address these categories in the future. For
the half, volumes were broadly in line with the previous year.
•US. Strong wholesale sales and new stores fuelled Burberry's 15%
underlying growth in the US market during the half. The Group opened stores
in King of Prussia, PA; Charlotte, NC; and Scottsdale, AZ in the half.
Wholesale growth resulted primarily from continued intensification of
Burberry's key accounts in the region.
•Europe. Europe's 7% underlying growth in the period represented the
strong retail and wholesale growth of certain Continental European markets
such as Italy, France, Benelux and Germany balanced by contributions from
more developed markets, including Spain.
•Asia. Asia's 29% underlying growth was largely driven by strong demand
from Chinese consumers, both within the country and in the region. For the
half, Greater China (Hong Kong and China) contributed approximately 5% of
Burberry's revenues. Gains in Southeast Asia and travel-related businesses
also contributed to the increase.
Financial overview
Burberry achieved a strong financial performance in the first half. Turnover
increased by 14% on an underlying basis (8% reported) to £347 million. Gross
margin expanded from 55.6% to 58.6% primarily as a result of reduced end of
season sale activity, sourcing gains and an increase in licensing's share of the
revenue mix. As a result EBITA** margin before exceptional gain expanded from
20.8% in the previous period to 22.7% in the current period. EBITA before
exceptional gain increased 18% (22% underlying) to £78.8 million and diluted EPS
before goodwill amortisation and exceptional gain grew 20% to 10.8p. The
directors have declared a 33% increase in the interim dividend to 2.0p.
Share repurchase programme
Following a review of its capitalisation strategy, the Group plans to implement
a share repurchase programme. As a result of Burberry's strong performance and
cash flow generation since the IPO and future prospects, the Group is currently
in a position to both return excess capital to shareholders and operate with a
more efficient capital structure going forward. Burberry will target a broadly
cash neutral position and currently aims to achieve this objective by March
2006. Based upon existing capital resources, operating trends and foreseeable
capital requirements, Burberry would expect to repurchase approximately £250
million of shares by that date. The Group also plans to maintain its progressive
dividend policy, increasing the payout ratio to approximately 30% over time.
Overall, this capitalisation strategy will enhance Burberry's capital efficiency
while providing adequate flexibility to fund growth opportunities.
In order to allow all shareholders to participate in the programme, maintain GUS
Group's current ownership level and minimise the impact on share trading
liquidity, Burberry's board is proposing to shareholders a mechanism (the
'Mechanism') which will allow the Group to purchase shares from GUS on an
off-market basis alongside open market purchases. Under the Mechanism,
Burberry's open market purchases would trigger corresponding purchases from GUS
calibrated to maintain GUS's then existing percentage ownership in Burberry. The
purchase price of the shares from GUS would be equal to the prices of the
corresponding open market purchases. The Group will shortly write to
shareholders to explain the Mechanism in greater detail and call an
extraordinary general meeting to approve the proposal.
Second half outlook
Looking to the second half of 2004/05.
• Retail. Burberry is on schedule to open a minimum of 4 stores and
concessions in the second half, resulting in a 7% increase in total selling
square footage for the year. Based on subdued demand in the initial weeks,
the Group is planning retail sales conservatively for the second half.
• Wholesale. Mid-to-high single digit wholesale sales growth is expected
for the Spring/Summer 2005 season.
• Licensing. The Group anticipates licensing revenue in line with the
first half.
Burberry will release a third quarter trading statement on 12 January 2005.
* Underlying figures are calculated at constant exchange rates.
** EBITA represents profit before interest, taxation, goodwill amortisation and
exceptional gain.
Financial Review
Group results
Six months to Six months to
30 September 2004 30 September 2003
£m Percentage of £m Percentage of
turnover turnover
-------------------- -------- -------- ----- ---------
Turnover
Retail 111.0 31.9% 107.2 33.4%
Wholesale 197.2 56.7% 183.4 57.1%
Licence 39.3 11.3% 30.7 9.6%
-------------------- -------- -------- ----- ---------
Total turnover 347.5 100.0% 321.3 100.0%
Cost of sales (144.0) (41.4%) (142.8) (44.4%)
-------------------- -------- -------- ----- ---------
Gross profit 203.5 58.6% 178.5 55.6%
Net operating
expenses (124.7) (35.9%) (111.6) (34.7%)
-------------------- -------- -------- ----- ---------
EBITA 78.8 22.7% 66.9 20.8%
Goodwill
amortisation (3.3) (0.9%) (3.5) (1.1%)
Exceptional gain 0.8 0.2% - -
-------------------- -------- -------- ----- ---------
Profit before
interest and
taxation 76.3 22.0% 63.4 19.7%
Net interest
income 2.0 0.6% 0.7 0.2%
-------------------- -------- -------- ----- ---------
Profit on ordinary
activities before
taxation 78.3 22.5% 64.1 20.0%
Tax on profit on
ordinary
activities (26.0) (7.5%) (22.2) (6.9%)
-------------------- -------- -------- ----- ---------
Profit on ordinary
activities after
taxation 52.3 15.1% 41.9 13.0%
-------------------- -------- -------- ----- ---------
Diluted EPS before
goodwill
amortisation and
exceptional gain 10.8p - 9.0p -
Diluted EPS 10.3p - 8.3p -
-------------------- -------- -------- ------ ---------
Diluted weighted
average number of
Ordinary Shares
(millions) 507.1 - 505.3 -
-------------------- -------- -------- -------- ---------
Burberry Group turnover is composed of revenue from three channels of
distribution: wholesale, retail and licensing operations. Wholesale revenue
arises from the sale of men's and women's apparel and accessories to wholesale
customers worldwide, principally leading and prestige department stores and
speciality retailers. Retail revenue is derived from sales through the Group's
directly operated store network. At 30 September 2004, the Group operated 151
retail locations (2003: 136) consisting of 57 Burberry stores (2003: 49), 70
concessions (2003: 64) and 24 outlet stores (2003: 23). Licence revenue consists
of royalties receivable from Japanese and product licensing partners.
Turnover
Total turnover in the first half advanced to £347.5m from £321.3m in the prior
period, representing an increase of 8%, or 14% on an underlying basis. In
determining 'underlying' performance, financial results are adjusted to exclude
the impact of foreign currency exchange rate movements between periods.
Retail sales increased by 4% reported (12% underlying) to £111.0m. This growth
was driven by newly opened stores with a marginal contribution from existing
stores. During the half, Burberry opened three stores in the US and one
concession in Korea. Sales growth varied by region. In the US market, a
combination of demanding comparatives (partially driven by unusual end of season
sale activity in the first quarter of the previous year), renovation activity in
key stores, and a slow start to autumn outerwear sales restrained sales growth
in the period. In Europe, Continental markets continued to achieve strong
growth, while the UK market was subdued for the half. In Asia, sales in Korea
continued to be volatile as a result of the difficult macro environment. Hong
Kong experienced vigorous growth throughout the half, while Southeast Asia,
boosted by new stores, achieved strong gains.
Wholesale sales increased by 8% reported (13% underlying) to £197.2m during the
half, driven by double digit gains for the Autumn/Winter 2004 season. The US
achieved strong growth driven by continued intensification of Burberry's key
accounts. In Europe, the underpenetrated markets of Italy, France, Benelux and
Germany combined with the more developed markets of Spain and the UK to produce
modest growth in the half. Asia, fuelled by demand from Greater China, achieved
substantial gains.
Licensing revenues in the half increased by 28% reported (31% underlying) to
£39.3m. Approximately half of the increase was driven by gains in Japan and half
driven by other licences. Gains in the Japanese market largely reflect a
reduction in management fees payable with respect to specific licences and
increases in certain royalty rates, with volumes broadly in line with the
previous year. Global product licences produced strong gains, including
fragrance, timepieces and children's apparel. The new fragrance agreement
Burberry entered into with its existing partner during the second quarter
contributed to this growth. The terms of the new agreement, which became
effective from 1 July 2004, provide for a substantially enhanced royalty rate
relative to the previous agreement.
Operating profit
Gross profit as a percentage of turnover increased to 58.6% in the first half of
2004/05 relative to 55.6% in the prior period. This expansion largely resulted
from reduced levels of seasonal clearance activity relative to the previous year
(particularly during the first quarter), pricing and sourcing gains and an
increase in licensing's share of the revenue mix.
Net operating expenses as a percentage of turnover rose to 35.9% from 34.7% in
the previous period. This increase primarily reflects continued retail
expansion, incremental marketing investment and additional infrastructure
investment in connection with growth of the business.
As a result of these factors, EBITA increased 18% to £78.8m, or 22.7% of
turnover from 20.8% in the comparative period. Exchange rate differences
relative to the comparative period reduced reported EBITA by £3.1m.
Goodwill amortisation expense was £3.3m compared to £3.5m in the previous
period, with the difference reflecting exchange rate movements between the
periods.
During the six months to September 2004, the Group recorded a £0.8m exceptional
gain relating to lapsed options under employee share plans.
Profit before interest and taxation increased 20% to £76.3m, or 22.0% of
turnover from 19.7% in the comparative period.
Net interest income
Net interest income was £2.0m in the six months to September 2004 compared to
£0.7m in the prior period. This increase reflects higher cash balances relative
to the previous period.
Profit before taxation
As a result of the above factors, Burberry reported profit before taxation of
£78.3m in the six months to 30 September 2004 compared to £64.1m in the prior
period.
Profit after taxation
Burberry reported a 32% effective tax rate on profit before goodwill
amortisation and exceptional gain for the half, which resulted in a £26.0m tax
charge and reported profit after taxation of £52.3m for the six months ended 30
September 2004, a 25% increase over the £41.9m reported in the prior period.
Diluted earnings per share before goodwill amortisation and exceptional gain
increased 20% to 10.8p in the half compared to 9.0p in the prior period. In the
six months to September 2004, the diluted weighted average number of ordinary
shares in issue was 507.1m (2003: 505.3m) for the purposes of calculating
diluted earnings per share. An average of 5.8m (2003: 4.2m) Ordinary Shares held
by the Group's Employee Share Ownership Trusts are excluded for the purposes of
earnings per share calculations.
Liquidity and Capital Resources
Historically, Burberry's principal uses of funds have been to support
acquisitions, capital expenditures and working capital growth in connection with
the expansion of its business. Principal sources of funds have been cash flow
from operations and financing from the Group's former 100% owner, GUS. The Group
currently expects to finance operations, capital expenditures and its share
repurchase programme with existing cash balances, cash generated from operating
activities and the use of credit facilities.
The Group plans to undertake a share repurchase programme. Burberry will target
a broadly cash neutral capitalisation and currently aims to achieve this
position by March 2006. Based upon existing capital resources, operating trends
and foreseeable capital requirements, Burberry would expect to repurchase
approximately £250 million of shares by that date.
The table below sets out the principal components of cash flow for the six month
periods to 30 September 2004 and 30 September 2003 and net funds at the period
end:
Six months to Six months to
30 September 30 September
2004 2003
£m £m
Operating profit before interest, taxation,
goodwill amortisation 78.8 66.9
and exceptional gain
Depreciation and related charges 9.7 10.4
Profit on disposal of fixed assets (0.1) -
Charges in respect of employee share incentive
schemes 2.9 2.1
Increase in stocks (12.6) (9.0)
Increase in debtors (40.4) (30.1)
(Decrease)/increase in creditors (1.1) 2.7
----------------------------------------------- ----------- -----------
Net cash inflow from operating activities 37.2 43.0
Net interest received 2.1 0.7
Taxation paid (19.9) (18.3)
Net purchases of fixed assets (16.9) (14.6)
----------------------------------------------- ----------- -----------
Net cash inflow before dividends and financing
activities 2.5 10.8
----------------------------------------------- ----------- -----------
Net funds at end of period 143.0 73.5
----------------------------------------------- ----------- -----------
Net cash inflow from operating activities decreased to £37.2m in the half year
to 30 September 2004 from £43.0m in the comparative period. Stocks levels grew
£12.6m increasing moderately relative to turnover over the period. The £40.4m
increase in debtors reflects seasonal growth of trade receivables.
Net cash outflow from purchases of fixed assets of £16.9m largely reflects
investment in the Group's retail operations and infrastructure. Capital
expenditures for the full 2004/05 financial year are expected to total
approximately £40m.
During the six months to 30 September 2004 Burberry invested £8.7m in its own
shares as a contribution to funding the Group's employee share ownership trusts.
An interim dividend of 2.0p per share (2003: 1.5p), £9.9m in total, will be
payable on 2 February 2005.
In line with its risk management policy, Burberry has continued to hedge its
principal foreign currency transaction exposures arising in respect of Yen
denominated royalty income and Euro denominated product purchases.
International Financial Reporting Standards
European Union listed companies are required to report consolidated financial
statements in accordance with International Financial Reporting Standards (IFRS)
for periods commencing on or after 1 January 2005.
Burberry is preparing for the adoption of IFRS. Reporting changes relative to
Burberry's current reporting standard (UK GAAP) are likely to result from
differences in the accounting treatment of goodwill and other intangibles,
dividends, foreign currency hedging, share-based remuneration, pension costs,
tax and deferred tax. The new standards may lead to increased volatility in the
profit and loss account and balance sheet and the related statements and notes.
The Group's results for the year to 31 March 2005 will be published in May 2005
under UK GAAP. Burberry intends to publish a reconciliation of these results to
those that would have been reported under IFRS shortly after that release. The
financial statements for the year to 31 March 2006 will be reported under IFRS,
as will the interim results for the six months to 30 September 2005.
Group profit and loss accounts
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
Note £m £m £m
------------------------------- ----- -------- -------- ------
Turnover 3 347.5 321.3 675.8
Cost of sales (144.0) (142.8) (284.2)
------------------------------- ----- -------- -------- ------
Gross profit 203.5 178.5 391.6
Net operating expenses (127.2) (115.1) (255.0)
------------------------------- ----- -------- -------- ------
Operating profit 76.3 63.4 136.6
------------------------------- ----- -------- -------- ------
Operating profit before
goodwill amortisation
and exceptional gain 78.8 66.9 141.2
- goodwill amortisation (3.3) (3.5) (6.8)
- exceptional gain relating
to IPO employee share
plans 4 0.8 - 2.2
------------------------------- ----- -------- -------- ------
Interest and similar income 2.2 0.8 2.3
Interest expense and similar
charges (0.2) (0.1) (0.1)
------------------------------- ----- -------- -------- ------
Profit on ordinary activities
before taxation 3 78.3 64.1 138.8
Tax on profit on ordinary
activities 5 (26.0) (22.2) (47.3)
------------------------------- ----- -------- -------- ------
Profit on ordinary activities
after taxation 52.3 41.9 91.5
Dividend - interim 7 (10.0) (7.4) (7.4)
Dividend - final 7 - - (14.9)
------------------------------- ----- -------- -------- ------
Retained profit for the
period 42.3 34.5 69.2
=============================== ===== ======== ======== ======
Pence per share
-----------------
Earnings
- basic 6 10.5p 8.5p 18.5p
- diluted 6 10.3p 8.3p 18.1p
Earnings before goodwill
amortisation and exceptional
gain
- basic 6 11.1p 9.1p 19.5p
- diluted 6 10.8p 9.0p 19.1p
Dividends
Dividend per share - interim 7 2.0p 1.5p 1.5p
Dividend per share - final 7 - - 3.0p
------------------------------- ----- -------- -------- ------
Statement of total recognised gains and losses
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
--------------------------------------- -------- -------- --------
Retained profit for the period 42.3 34.5 69.2
--------------------------------------- -------- -------- --------
Currency translation differences 10.5 (1.5) (22.4)
Tax impact of currency translation
differences (0.3) (0.1) (1.4)
--------------------------------------- -------- -------- --------
Net impact of currency translation
differences 10.2 (1.6) (23.8)
--------------------------------------- -------- -------- --------
Total recognised gains and losses for
the period 52.5 32.9 45.4
------------------------------- -------- -------- --------
Reconciliation of movement in Shareholders' Funds
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
(Restated) (Restated)
£m £m £m
--------------------------------- -------- -------- --------
Profit on ordinary activities
after taxation 52.3 41.9 91.5
Dividend - interim (10.0) (7.4) (7.4)
Dividend - final - - (14.9)
--------------------------------- -------- -------- --------
Retained profit for the period 42.3 34.5 69.2
Shares issued under Burberry
share incentive schemes 9.2 0.3 2.5
Exercise of IPO Restricted Share
Plan and IPO share option awards (5.9) - -
Lapse of IPO Restricted Share
Plan awards (0.7) - (0.8)
Debit in respect of share
incentive schemes* (4.5) (4.9) (3.0)
Net impact of currency
translation differences 10.2 (1.6) (23.8)
--------------------------------- -------- -------- --------
Net addition to Shareholders'
Funds 50.6 28.3 44.1
--------------------------------- -------- -------- --------
Opening Shareholders' Funds - as
previously reported 437.1 390.0 390.0
Prior period adjustment* (6.3) (3.3) (3.3)
--------------------------------- -------- -------- --------
Opening Shareholders' Funds - as
restated 430.8 386.7 386.7
--------------------------------- -------- -------- --------
Closing Shareholders' Funds 481.4 415.0 430.8
--------------------------------- -------- -------- --------
*Prior period adjustment reflects the impact of adopting UITF Abstract 38
'Accounting for ESOP Trusts', see note 2.
Group balance sheets
As at As at As at
30 September 30 September 31 March
2004 2003 2004
(Restated) (Restated)
Note £m £m £m
-------------------------------- ----- ------- ------- -------
Fixed assets
Intangible assets 110.5 121.6 111.4
Tangible fixed assets 161.4 163.7 149.8
Investments* 0.1 0.1 0.1
-------------------------------- ----- ------- ------- -------
272.0 285.4 261.3
Current assets
Stock 104.4 91.9 89.5
Debtors 8 162.3 150.2 120.8
Cash and short term deposits 143.5 73.6 158.7
-------------------------------- ----- ------- ------- -------
410.2 315.7 369.0
Creditors - amounts
falling due within one year* 9 (181.1) (147.5) (158.8)
-------------------------------- ----- ------- ------- -------
Net current assets 229.1 168.2 210.2
-------------------------------- ----- ------- ------- -------
Total assets less current
liabilities 501.1 453.6 471.5
Creditors - amounts falling due
after more than one year 10 (14.5) (34.0) (35.4)
Provisions for liabilities and
charges (5.2) (4.6) (5.3)
-------------------------------- ----- ------- ------- -------
Net assets 481.4 415.0 430.8
-------------------------------- ----- ------- ------- -------
Capital and reserves
Called up share capital 1.1 1.1 1.1
Share premium account 133.9 122.5 124.7
Revaluation reserve 23.8 24.8 23.5
Capital reserve 41.4 46.0 42.9
Other reserve 11 - 704.1 -
Profit and loss account* 11 281.2 (483.5) 238.6
-------------------------------- ----- ------- ------- -------
Equity Shareholders' Funds 480.6 414.2 430.0
Non-equity Shareholders' Funds 0.8 0.8 0.8
-------------------------------- ----- ------- ------- -------
Total Shareholders' Funds 481.4 415.0 430.8
-------------------------------- ----- ------- ------- -------
*Prior period adjustments reflect the impact of adopting UITF Abstract 38
'Accounting for ESOP Trusts', see note 2.
Group cash flow statements
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
(Restated) (Restated)
£m £m £m
---------------------------------- -------- -------- --------
Net cash inflow from operating
activities 37.2 43.0 185.6
Returns on investments and
servicing of finance
Interest received 2.3 0.8 2.3
Interest paid (0.2) (0.1) (0.1)
---------------------------------- -------- -------- --------
Net cash inflow from returns on
investments and servicing of
finance 2.1 0.7 2.2
---------------------------------- -------- -------- --------
Taxation paid (19.9) (18.3) (49.5)
---------------------------------- -------- -------- --------
Capital expenditure
Purchase of tangible and
intangible fixed assets (17.2) (14.6) (28.8)
Sale of tangible fixed assets 0.3 - -
---------------------------------- -------- -------- --------
Net cash outflow from capital
expenditure (16.9) (14.6) (28.8)
---------------------------------- -------- -------- --------
Acquisitions
Deferred consideration paid
for purchase of businesses - - (2.5)
---------------------------------- -------- -------- --------
Net cash outflow from acquisitions - - (2.5)
---------------------------------- -------- -------- --------
Net cash inflow before dividends
and financing activities 2.5 10.8 107.0
Dividends
Equity dividends paid (14.9) (9.9) (17.3)
---------------------------------- -------- -------- --------
Net cash (outflow)/inflow
before management of liquid
resources and financing (12.4) 0.9 89.7
---------------------------------- -------- -------- --------
Management of liquid resources
Decrease/(increase) in short term
deposits* 18.1 (1.4) (69.2)
---------------------------------- -------- -------- --------
Financing
Issue of Ordinary Share capital 3.3 0.3 0.9
Purchase of own shares by ESOP (8.7) (7.0) (7.0)
Sale of own shares by ESOP 1.3 - 0.4
---------------------------------- -------- -------- --------
Net cash outflow from financing (4.1) (6.7) (5.7)
---------------------------------- -------- -------- --------
Increase/(decrease) in cash during
the period 1.6 (7.2) 14.8
---------------------------------- -------- -------- --------
* Decrease/(increase) in short-term deposits has been restated to include
movements in net balances due from GUS group (30 September 2003: £nil; 31 March
2004: £15.8m)
Six months to Six months to Year to
Reconciliation of operating profit 30 September 30 September 31 March
to net cash inflow from operating 2004 2003 2004
activities £m (Restated) (Restated)
£m £m
------------------------------------ -------- -------- --------
Operating activities
Operating profit 76.3 63.4 136.6
Exceptional gain (0.8) - (2.2)
Goodwill amortisation 3.3 3.5 6.8
------------------------------------ -------- -------- --------
Operating profit before goodwill
amortisation and exceptional gain 78.8 66.9 141.2
Depreciation, impairment and
trademark amortisation charges 9.7 10.4 28.5
Profit on disposal of fixed assets
and similar non-cash charges (0.1) - 1.7
Charges in respect of Burberry
share 2.9 2.1 3.6
incentive schemes
Increase in stocks (12.6) (9.0) (7.5)
Increase in debtors (40.4) (30.1) (1.5)
(Decrease)/increase in creditors (1.1) 2.7 19.6
------------------------------------ -------- -------- --------
Net cash inflow from operating
activities 37.2 43.0 185.6
------------------------------------ -------- -------- --------
Reconciliation of net cash flow to Six months to Six months to Year to
movement in net funds 30 September 30 September 31 March
2004 2003 2004
£m £m £m
------------------------------------ ---------- ---------- --------
Increase/(decrease) in cash during
the period 1.6 (7.2) 14.8
Cash (inflow)/outflow from movement
in liquid resources (18.1) 1.4 69.2
------------------------------------ ---------- ---------- --------
Movement in net funds resulting from
cash flows (16.5) (5.8) 84.0
Exchange movements 1.6 (0.3) (5.7)
------------------------------------ ---------- ---------- --------
Movement in net funds (14.9) (6.1) 78.3
Net funds at beginning of period 157.9 79.6 79.6
------------------------------------ ---------- ---------- --------
Net funds at end of period 143.0 73.5 157.9
------------------------------------ ---------- ---------- --------
As at As at As at
30 September 30 September 31 March
2004 2003 2004
Analysis of net funds £m £m £m
------------------------------------ ---------- ---------- --------
Cash and short term deposits 143.5 73.6 158.7
Unsecured overdrafts (0.5) (0.1) (0.8)
------------------------------------ ---------- ---------- --------
Net funds at end of period 143.0 73.5 157.9
-------------------------------- ---------- ---------- --------
Notes to the interim financial statements
1. Basis of preparation
The interim report comprises the unaudited results for the six months to 30
September 2004 and 30 September 2003 and the audited results for the year to 31
March 2004. The interim financial statements are not audited and do not
constitute statutory accounts. These financial statements have been formally
reviewed by the Group's auditors, PricewaterhouseCoopers LLP, and their report
is set out on page 20.
The financial information contained in this interim report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The information at 31 March 2004 has been extracted from the statutory accounts
for the year to 31 March 2004, which were reported on by the auditors without
qualification or statement under section 237(2) or (3) of the Companies Act 1985
and have been delivered to the Registrar of Companies.
2. Changes in accounting policy and presentation
The results for the six months to 30 September 2003 and year to 31 March 2004
have been restated following the adoption of UITF Abstract 38 'Accounting for
ESOP Trusts'. Shares held by the Burberry Group plc ESOP Trust and the Burberry
Group Share Incentive Plan ('the Burberry Group ESOPs'), previously shown in the
balance sheet as fixed asset investments, are now required to be shown as a
deduction from Shareholders' Funds. The consideration paid for these shares and
the related allocations to employees are included as an adjustment to the profit
and loss reserve account.
The impact of the treatment above is to:
a) Reduce investments by £10.3m as at 30 September 2003 and by £8.7m as at
31 March 2004;
b) Reduce accruals and deferred income by £2.1m as at 30 September 2003 and by
£2.4m as at 31 March 2004;
c) Increase the deficit in the profit and loss reserve account by £8.2m as at
30 September 2003 and reduce the profit and loss reserve account by
£6.3m as at 31 March 2004.
The consolidated cash flow statement has been restated to reflect the
reallocation of the cash payments relating to the purchase of shares from
'Capital expenditure and financial investment' to 'Financing'.
The group has also adopted the provision of the revised UITF Abstract 17
'Employee share schemes' concerning the recognition of the cost of employee
share incentive schemes. The cost of employee share schemes is charged to the
profit and loss account using the quoted market price of the shares at the date
of the grant less the exercise price of the share options granted. The charge is
accrued over the performance period of the awards. There is no material effect
on profit before taxation in either the current or the prior periods.
Notes to the interim financial statements (continued)
3. Segmental analysis
(i) Geographical analysis - turnover by destination
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
-------------------------------- -------- -------- --------
Europe 179.7 172.6 346.8
North America 73.8 71.7 162.4
Asia Pacific 91.2 75.1 162.6
Other 2.8 1.9 4.0
-------------------------------- -------- -------- --------
Total 347.5 321.3 675.8
-------------------------------- -------- -------- --------
(ii) Analysis by class of business
Turnover - analysis by class of business
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
-------------------------------- -------- -------- --------
Wholesale 197.2 183.4 351.4
Retail 111.0 107.2 257.4
-------------------------------- -------- -------- --------
Wholesale and Retail 308.2 290.6 608.8
Licence 39.3 30.7 67.0
-------------------------------- -------- -------- --------
Total 347.5 321.3 675.8
-------------------------------- -------- -------- --------
An analysis of turnover by product category is shown below:
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
-------------------------------- -------- -------- --------
Womenswear 118.5 107.0 225.7
Menswear 95.1 94.3 190.1
Accessories (including childrens) 93.3 87.3 189.0
Other 1.3 2.0 4.0
-------------------------------- -------- -------- --------
Wholesale and Retail 308.2 290.6 608.8
Licence 39.3 30.7 67.0
-------------------------------- -------- -------- --------
Total 347.5 321.3 675.8
-------------------------------- -------- -------- --------
As at As at As at
30 September 30 September 31 March
2004 2003 2004
-------------------------------- -------- -------- --------
Number of stores 151 136 145
-------------------------------- -------- -------- --------
Notes to the interim financial statements (continued)
3. Segmental analysis (continued)
Profit before taxation - analysis by class of business
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
--------------------------------------- -------- -------- --------
Wholesale and Retail 45.1 40.2 85.2
Licence 33.7 26.7 56.0
--------------------------------------- -------- -------- --------
78.8 66.9 141.2
Net interest income 2.0 0.7 2.2
--------------------------------------- -------- -------- --------
Profit before goodwill amortisation,
exceptional gain and taxation 80.8 67.6 143.4
Goodwill amortisation - Wholesale and
Retail (3.3) (3.5) (6.8)
Exceptional gain - Wholesale and
Retail 0.8 - 1.6
Exceptional gain - Licence - - 0.6
--------------------------------------- -------- -------- --------
Profit on ordinary activities before
taxation 78.3 64.1 138.8
--------------------------------------- -------- -------- --------
The results above are stated after the allocation of costs of a group-wide
nature.
4. Exceptional gain
The exceptional gain arising in the six months to 30 September 2004 (2003: £nil)
consists of the following amounts.
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
------------------------------------ -------- -------- --------
Lapse of awards under the IPO
Restricted Share Plan ('the RSP') 0.7 - 0.8
Credit in respect of employers'
National Insurance liability arising
on the RSP awards 0.1 - 1.4
---------------------------------- -------- -------- --------
Total 0.8 - 2.2
---------------------------------- -------- -------- --------
Awards were made under the RSP to the executive directors and other senior
management of Burberry Group in respect of services provided prior to flotation.
No previous awards had been made, and no further awards will be made, under the
RSP.
An exceptional gain of £0.7m arose in the six months to 30 September 2004 on the
lapsing of share awards, which had previously been granted to an individual in
the year to 31 March 2003. A further credit of £0.1m relating to National
Insurance also arose in the period from the lapse of these share awards.
The associated tax charge relating to this exceptional gain was £0.2m in the
period (2003: £nil) and there was no cash flow during the period in relation to
these items (2003: £nil).
5. Taxation
The effective rate of tax, before goodwill amortisation and exceptional gain, is
based on the estimated tax charge for the full year at a rate of 32.0% (2003:
33.0%). The actual effective rate of tax for the year to 31 March 2004 on this
basis was 32.6%.
The tax charge in the six months to 30 September 2004 is treated as being wholly
current, with no deferred element.
Notes to the interim financial statements (continued)
6. Earnings per share
The calculation of basic earnings per share is based on profit after taxation
divided by the weighted average number of Ordinary Shares in issue during the
period. Basic earnings per share before amortisation of goodwill and exceptional
gain is disclosed to indicate the underlying profitability of the Burberry
Group.
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
£m £m £m
-------------------------------------- -------- -------- --------
Profit on ordinary activities after
taxation, but before goodwill
amortisation and exceptional gain 54.9 45.3 96.6
Effect of goodwill amortisation (net
of attributable taxation) (3.2) (3.4) (6.6)
Effect of exceptional gain (net of
attributable taxation) 0.6 - 1.5
-------------------------------------- -------- -------- --------
Profit on ordinary activities after
taxation 52.3 41.9 91.5
====================================== ======== ======== ========
The weighted average number of Ordinary Shares represents the weighted average
number of Burberry Group plc Ordinary Shares in issue throughout the period,
excluding Ordinary Shares held in Burberry Group's Employee Share Ownership
Trusts.
Diluted earnings per share is based on the weighted average number of Ordinary
Shares in issue during the period. In addition, account is taken of any awards
made under the Restricted Share Plans and Share Option Schemes, which will have
a dilutive effect when exercised (full vesting of all outstanding awards is
assumed).
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
Millions Millions Millions
-------------------------------------- -------- -------- --------
Weighted average number of Ordinary
Shares in issue during the period 496.2 495.8 495.6
Dilutive effect of the RSPs and Share
Option Schemes 10.9 9.5 10.3
-------------------------------------- -------- -------- --------
Diluted weighted average number of
Ordinary Shares in issue during the
period 507.1 505.3 505.9
-------------------------------------- -------- -------- --------
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
Basic earnings per share Pence Pence Pence
-------------------------------------- -------- -------- --------
Basic earnings per share before
goodwill amortisation and exceptional
gain 11.1 9.1 19.5
Effect of goodwill amortisation (0.7) (0.6) (1.3)
Effect of exceptional gain 0.1 - 0.3
-------------------------------------- -------- -------- --------
Basic earnings per share 10.5 8.5 18.5
-------------------------------------- -------- -------- --------
Six months to Six months to Year to
30 September 30 September 31 March
2004 2003 2004
Diluted earnings per share Pence Pence Pence
-------------------------------------- -------- -------- --------
Diluted earnings per share before
goodwill amortisation and exceptional
gain 10.8 9.0 19.1
Effect of goodwill amortisation (0.6) (0.7) (1.3)
Effect of exceptional gain 0.1 - 0.3
-------------------------------------- -------- -------- --------
Diluted earnings per share 10.3 8.3 18.1
-------------------------------------- -------- -------- --------
7. Dividend
The interim dividend of 2.0p (2003: 1.5p) per share will be paid on 2 February
2005 to Shareholders on the Register at the close of business on 21 January
2005.
Notes to the interim financial statements (continued)
8. Debtors
As at As at As at
30 September 30 September 31 March
2004 2003 2004
£m £m £m
------------------------------------ -------- -------- --------
Amounts falling due within one year
Trade debtors 119.6 112.2 86.1
Other debtors 1.2 3.0 0.9
Prepayments and accrued income 22.4 14.5 12.0
Corporation tax 0.1 0.2 2.8
Trading balances owed by GUS group 0.2 0.1 -
------------------------------------ -------- -------- --------
143.5 130.0 101.8
Amounts falling due after more than
one year
Other debtors 1.1 1.1 1.5
Deferred tax assets 16.9 18.3 16.7
Corporation tax 0.8 0.8 0.8
-------------------------------- -------- -------- --------
Total 162.3 150.2 120.8
-------------------------------- -------- -------- --------
The deferred tax assets at 30 September 2004 and 2003 reflect the asset recorded
at the immediately preceding 31 March, adjusted for any foreign currency
movements.
9. Creditors - amounts falling due within one year
As at As at As at
30 September 30 September 31 March
2004 2003 2004
(Restated) (Restated)
£m £m £m
-------------------------------- -------- -------- --------
Unsecured:
Overdrafts 0.5 0.1 0.8
Trade creditors 29.5 24.1 31.2
Trading balances owed to GUS
group 8.4 7.0 6.8
Corporation tax (UK and overseas) 24.0 22.8 19.3
Other taxes and social security
costs 5.8 5.4 4.2
Other creditors 18.5 17.8 18.7
Accruals and deferred income 61.8 60.4 62.9
Deferred consideration for
acquisitions 22.7 2.5 -
Dividend payable - GUS group 6.6 5.8 9.9
Dividend payable - other
Shareholders 3.3 1.6 5.0
------------------------------- -------- -------- --------
Total 181.1 147.5 158.8
------------------------------- -------- -------- --------
10. Creditors - amounts falling due after more than one year
As at As at As at
30 September 30 September 31 March
2004 2003 2004
£m £m £m
------------------------------- --------- --------- ---------
Unsecured:
Other creditors, accruals and
deferred income 4.5 3.5 3.7
Deferred consideration for
acquisitions 10.0 30.5 31.7
------------------------------- --------- --------- ---------
Total 14.5 34.0 35.4
=============================== ========= ========= =========
Notes to the interim financial statements (continued)
11. Reserves
The other reserve represents the amounts transferred from the share premium
account within Burberry Group plc ('the Company') as a result of the capital
reduction carried out immediately prior to flotation. This reserve was
reclassified as distributable and included in the profit and loss reserve, when
the creditors of the Company as at the date of the capital reduction were
settled in full, on 31 December 2003.
The cost of own shares held in the Burberry Group ESOPs has been offset against
the profit and loss reserve as the amounts paid reduce the profits available for
distribution by the Burberry Group and Company. As at 30 September 2004 the
amounts offset against this reserve are £19.5m (30 September 2003: £12.5m; 31
March 2004: £12.1m).
Dividend distributions are dependent on the Company's accumulated profit and
loss account. As at 30 September 2004 the profit and loss account of the Company
was £802.3m (30 September 2003 £131.3m (restated); 31 March 2004: £818.7m
(restated)).
12. Foreign currency
The results of overseas subsidiaries are translated at the average rate for the
period. The assets and liabilities of such undertakings are translated at the
period end exchange rates. Differences arising on the retranslation of the
opening net investments in subsidiary companies, and on the translation of their
results, are taken to reserves and are reported in the statement of total
recognised gains and losses.
Average Closing
Six months to Six months to Year to As at As at As at
30 September 30 September 31 March 30 September 30 September 31 March
2004 2003 2004 2004 2003 2004
----------------- -------- -------- ------- -------- -------- --------
Euro 1.49 1.43 1.44 1.46 1.43 1.50
US dollar 1.81 1.62 1.70 1.80 1.66 1.84
Hong Kong dollar 14.13 12.61 13.20 14.07 12.89 14.31
Korean won 2,099 1,935 2,016 2,078 1,913 2,106
----------------- -------- -------- ------- -------- -------- --------
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 182.0: £1 in the
six months to 30 September 2004 (2003: Yen 179.88: £1); year to 31 March 2004
Yen 182.3: £1.
Independent review report to Burberry Group plc
Introduction
We have been instructed by Burberry Group plc to review the financial
information of Burberry Group plc and its subsidiaries ('the Group') which
comprises the Group profit and loss accounts, the statement of total recognised
gains and losses, the reconciliation of movement in Shareholders' Funds, the
Group balance sheets, the Group cash flow statements and the notes to the
interim financial statements. We have read the other information contained in
the interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for Burberry Group plc for the
purpose of the Listing 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.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months to
30 September 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 November 2004
Shareholder information
Registrar
Enquiries concerning holdings of the Company's shares and notification of the
holder's change of address should be referred to Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex, BN99 6DA, telephone: 0870 600 3970. In
addition, Lloyds TSB Registrars offer a range of shareholder information online
at www.shareview.co.uk. A text phone facility for those with hearing
difficulties is available by calling 0870 600 3950.
Share price information
The latest Burberry Group plc share price is available on Ceefax and also on the
Financial Times Cityline Service on 0906 843 2727 (calls charged at 60p per
minute).
Internet
A full range of investor relations information on Burberry Group plc, including
latest share price and dividend history, is available on the company's website
(www.burberry.com).
Financial calendar for the year to 31 March 2005
Third quarter trading update 12 January 2005
Interim dividend record date 21 January 2005
Interim dividend to be paid 2 February 2005
Second half trading update 13 April 2005
Preliminary announcement of results for the year to 31 March 2005 May 2005
Annual General Meeting July 2005
Registered office
Burberry Group plc
18-22 Haymarket
London
SW1Y 4DQ
Telephone: 020 7968 0000
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