Final Results - Part 1

GUS PLC 29 May 2002 PART 1 29 May 2002 GUS plc PRELIMINARY RESULTS FOR YEAR ENDED 31 MARCH 2002 Highlights * 13% increase in profit before amortisation of goodwill, exceptional items and taxation to £552m (2001: £487m) * 12% increase in earnings per share before amortisation of goodwill and exceptional items to 41.7p (2001: 37.2p) * 3% increase in the final dividend to 15.2p (2001: 14.8p) * Record profits at Argos, Experian and Burberry * Experian: sales up 7%, profits up 6%, demonstrating resilience in difficult North American market * Argos Retail Group: sales up 9%, profit up 20%, with excellent performance from Argos generating 13% like-for-like sales growth and 27% profit growth * Burberry: sales up 18%, profit up 30%, as brand delivers strong business and financial momentum Sir Victor Blank, Chairman of GUS, commented: 'The strategy put in place in early 2000 is delivering good results as we shape and improve our businesses. Over the last two years, we have grown profits by 23% and EPS by 21%. Strong management teams and continuing investment underpin my confidence in the Group's ability to deliver good returns for shareholders going forward.' John Peace, Chief Executive of GUS, commented: 'GUS has completed another successful year with Group profit up by 13% despite difficult trading conditions in some of our markets. Argos, Experian and Burberry have all reported record profits. Despite our expectation of a slowdown in UK consumer spending this year and continued difficult conditions for marketing services in North America, we look forward to the coming year with confidence.' Enquiries GUS John Peace Chief Executive 020 7495 0070 David Tyler Finance Director Fay Dodds Investor Relations Finsbury Rupert Younger 020 7251 3801 Rollo Head There will be a presentation today to analysts and institutions at 10am at the Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ and a press conference at 12 noon at the same location. GUS announcements are available on its web site www.gusplc.com. The slide pack and presentation to analysts and institutions will also be available there later in the day. The next detailed comment on current trading will be the First Quarter Trading Update at the AGM on 24 July 2002. This announcement is not an offer of securities for sale in the United States, Canada, Australia or Japan. Shares in Burberry Group will not be registered under the US Securities Act of 1933 and will not be offered or sold in the United States absent registration or an exemption from registration. No public offering of securities will be made in the United States. 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. Factors that might cause forward looking statements to differ materially from actual results include, among other things, transactional and economic factors, and specifically our ability to generate revenues from our divisions' new and planned acquisitions. GUS assumes no responsibility to update any of the forward looking statements contained herein. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any shares in GUS plc. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor. Stabilisation/FSA GROUP RESULTS GUS has completed another successful year. Despite difficult trading conditions in some of our markets, all our major divisions grew sales and profits. In the year ended 31 March 2002, Group sales grew by 7% to £6.5bn. Profit before amortisation of goodwill, exceptional items and taxation increased to £552.1m from £486.8m. This represents a rise of 13% on last year. Earnings per share before amortisation of goodwill and exceptional items increased by 12% to 41.7p (2001: 37.2p). The Group's effective tax rate (based on profit before amortisation of goodwill and loss on sale of businesses) was 23.8%, compared to 23.5% last year. The Group generated £478m of free cashflow in the year before acquisitions, disposals and dividends (2001: £481m). Year-end borrowings were reduced to £1.5bn (£1.3bn excluding securitised loans). The Board has proposed a final dividend of 15.2p (2001: 14.8p), giving 21.7p for the year (21.0p last year). Dividend cover is 1.9 times, based on EPS of 41.7p. The dividend has not been increased as quickly as earnings because of our aim gradually to restore the dividend cover to two times earnings. Sales Profit before taxation 12 months to 31 March 2002 2001 2002 2001 £m £m £m £m Experian 1,092 1,018 229.1 216.6 Argos Retail Group 4,629 4,250 254.7 212.1 Reality 471 476 0.5 5.1 Burberry 499 425 90.3 69.5 Other 154 265 44.0 57.8 Inter-divisional turnover (387) (393) - - Total 6,457 6,041 618.6 561.1 Net interest (66.5) (74.3) Profit before amortisation of goodwill, exceptional items and 552.1 486.8 taxation Exceptional items (including impairment of goodwill) (72.6) (84.7) Amortisation of goodwill (99.4) (92.3) Profit before taxation 380.1 309.8 EPS before amortisation of goodwill and exceptional items 41.7p 37.2p Reported EPS 25.7p 20.3p CHIEF EXECUTIVE'S REVIEW The year under review has been another successful one for GUS. We have delivered a strong financial performance while making further significant operational and strategic progress. Strong financial performance Despite difficult trading conditions in some of our markets, sales from continuing businesses increased by 10% in the year to March 2002. Profit before amortisation of goodwill, exceptional items and taxation from continuing businesses grew by 17% in the year, or 20% if restructuring costs of £12m are excluded. This was achieved despite significant revenue investment in areas such as the Argos store card and new products at Experian, which will underpin future profits growth. Argos, Experian and Burberry all reported record profits. Argos in particular had an excellent year, with like-for-like sales growth of 13%. Since the acquisition of Argos in April 1998, we have increased sales by over £1bn to £2.8bn and operating profit by over £80m to £204m. Operational progress GUS has invested heavily during the year across its main businesses. Group capital expenditure was £322m, up from £268m in 2001. For the coming year, we expect to spend about £400m. Significant projects include major warehouses for Argos and flagship stores for Burberry. We also expect an additional working capital investment in 2003 of up to £100m in the Argos store card and personal loan books. These projects are expected to provide returns in excess of our cost of capital. There has been further strengthening of the management teams across GUS. Nearly all the Experian North America senior team have been appointed in the last two years and Tom O'Neill joined Burberry as President in November 2001. Strategic progress All the main businesses within GUS now have clear strategies for growth. We continue to reposition the Group to focus on these activities because of the size of the opportunities available and because of our market-leading positions. During the year, we have disposed of more non-core businesses, such as the Swiss home shopping business and UK stationery and printing activities, while continuing to run down our property and car financing operations. Today's announcement confirming our plans to pursue a partial IPO of Burberry, subject to market conditions, is a further step in providing greater strategic focus within GUS and will establish an independent market value for Burberry. We have also made some small, targeted acquisitions during the year, particularly in Experian in areas such as e-mail distribution and German account processing. After the year-end, we acquired ConsumerInfo.com, the leading supplier of on-line credit reports and scores to consumers in the US, for $130m. In the coming year, Experian North America is looking to drive growth by buying in, wherever possible, its affiliated credit bureaux. EXPERIAN 12 months to 31 March Sales Operating Profit 2002 2001 2002 2001 £m £m £m £m Experian North America 688 661 159.5* 155.4 Experian International 404 357 69.6 61.2 Total 1,092 1,018 229.1 216.6 Operating margin 21.0% 21.3% * After charging £7.7m restructuring costs (2001: nil) For Experian as a whole, sales for the year increased by 7% and operating profit by 6%, despite difficult market conditions particularly in North America. At constant exchange rates and excluding acquisitions and disposals, sales grew by 3% and operating profit by 4%. Globally, Credit Information and Credit Solutions achieved strong growth (up 10%). Marketing Information and Marketing Solutions sales grew by 4%, despite a significant slowdown in direct mailing activity during the year. Major contracts were won during the year in both Experian North America and International, with total contract value over their lifetime being in excess of £140m. As announced at our interim results in November 2001, we now provide additional information on Experian to improve understanding of its businesses. Sales are split five ways: Information - credit : providing data for credit purposes Information - marketing : providing data for marketing purposes Solutions - credit : helping clients with decision making for credit purposes Solutions - marketing : helping clients with decision making for marketing purposes Outsourcing : supporting clients in process tasks Segmental information for this year and comparatives for last year are given in Appendix One. Additional information on Experian and the markets it serves is available on the GUS plc web site, www.gusplc.com. Experian North America 12 months to 31 March 2002 2001 Change Underlying change £m £m * Sales 688 661 4% 0% Operating profit 159.5 155.4 3% 1% Of which: - Direct business 136.5 145.2 (6%) (7%) - Restructuring costs (7.7) - - - - Associates (mainly FARES) 30.7 10.2 - - Operating margin 23.2% 23.5% * at constant exchange rates, excluding acquisitions and disposals Experian North America demonstrated its resilience in the year to March 2002 in the face of the economic slowdown in the US and the adverse impact of the events of September 11. Sales at constant exchange rates were marginally ahead of last year and operating profit in dollars was broadly unchanged, despite incurring $11m of restructuring costs. On an underlying basis and excluding these restructuring costs, profits increased by 6%. Total sales for the year were $985m (2001: $981m). Credit Information and Credit Solutions together increased sales by 4% with lower interest rates stimulating the mortgage and automotive finance markets. Performance also benefited from the growing momentum of new products such as fraud and authentication services and sales of credit reports and scores direct-to-consumer. Marketing Information and Marketing Solutions sales in dollars fell by 4%, excluding acquisitions. In common with other direct marketing services companies, Experian North America was affected by the decline in marketing expenditure by US corporates. This was most marked for clients in the catalogue, retail and publishing sectors. Outsourcing sales, which in the US are mainly print and mail activities, declined by 11% reflecting the difficult economic conditions, further aggravated by the anthrax scares in the third quarter. Management has focused aggressively on reducing costs in the core business, while continuing to invest in new product areas for future growth. Over 700 employees were made redundant during the year at a cost of $11m. This should save about $40m on an annualised basis, with half the benefit having been realised in the year to March 2002. Savings in the current year will be offset by cost inflation which is expected in such areas as insurance premiums and employee costs. FARES, our real estate information joint venture, had an exceptional year, generating profit of over £30m. It benefited in particular from the strong mortgage refinancing market. As Experian owns only 20% of the FARES joint venture, it does not include any sales in its reported numbers. Had Experian's 20% share of FARES' sales been included for the full year, sales growth on an underlying basis would have been 3%. Despite a weak economic background, Experian North America remains focused on growth: - it is building on its core businesses. Management was further strengthened throughout the organisation, with the appointment of Don Robert as Chief Operating Officer and six other new senior recruits. As a result of more co-ordinated and focused sales efforts across North America, Experian has won share with many strategic accounts in the financial services, insurance and retail markets. In the coming year, Experian North America is looking to drive growth by buying in, wherever possible, its affiliated credit bureaux. It currently has 38 bureaux in the US which have the right, under historical agreements, to sell Experian's consumer credit reports in certain geographic regions. Experian receives wholesale revenue from these affiliates for consumer credit reports. The affiliates then resell these reports to their clients. In addition, Experian pays the affiliates to purchase credit information on consumers living in their territory. Buying back these affiliates will enable Experian North America to gain control of the distribution of its products and give it a greater share of the value chain in consumer credit by growing sales, profit and cashflow; - it is successfully selling new products. For example, significant progress has been made in Customer Relationship Management and Customer Data Integration services (Truvue). An additional 13 Truvue clients were added in the year, including GE Capital, AT&T, Key Bank and Progressive Insurance. New e-series clients include VISA, Dell Financial Services and First American Payment Processing. Toyota Financial Services, Dell Financial Services, American Express, Bank One/First USA, Discover Financial Services and Sprint PCS have all joined the National Fraud Database during the year; and - it is growing by targeted acquisitions. Direct-to-consumer is a key growth area for Experian North America, which saw significant investment and growth in its own credit report, score and monitoring services during the year. To complement this, in April 2002, ConsumerInfo.com was acquired for $130m. It is the leading supplier of online credit reports, scores and related information to consumers in the United States. The acquisition, which is proving to be immediately earnings enhancing, gives Experian the market-leading position in this fast growth industry. In October 2001, Experian North America decided to retain certain elements of data on the consumer credit database for at least an additional two years and reload certain data that had previously been archived. As a result, with effect from 1 April 2002, Experian North America will extend the period over which it amortises the cost of acquiring, loading and storing consumer credit data from five years to seven years. This will benefit the operating profit by approximately $8m in the year to March 2003. The amortisation periods for all other databases remain unchanged. Experian International 12 months to 31 March 2002 2001 Change Underlying £m £m change* Sales UK 241 216 12% 9% Rest of World 163 141 16% 11% Total 404 357 13% 10% Operating profit 69.6 61.2 14% 11% Operating margin 17.2% 17.1% * at constant exchange rates, excluding acquisitions and disposals Experian International had another strong year, with a sales increase of 13% and operating profit growth of 14% (10% and 11% at constant exchange rates and excluding acquisitions and disposals). The strongest performance within Experian International came from Credit Solutions, now 33% of sales, which grew by 15% on an underlying basis. This reflected the strength of account processing and fraud prevention in the UK and of application processing, scoring and analytical services in all regions. Underlying growth of 12% in Outsourcing, which is mainly in Continental Europe, reflected a combination of increased volumes from existing clients and additional volumes from major contracts won in the previous year. Marketing Information and Marketing Solutions sales growth slowed in the second half, reflecting weakness in demand for marketing services in the UK from the financial services sector. Experian International continues to focus on sustaining sales and profit growth: - it is building on its core businesses. Selected client wins include: * HBOS: business information and solutions to support commercial lending (Credit Information and Credit Solutions); * Spanish banks: preferred supplier of a consumer credit database to a consortium of Spanish banks (Credit Information); * Edeka: provision of loyalty card processing services (Credit Solutions); * BNP Paribas: five year contract for cheque processing (Outsourcing); * Lexus: provision of a web-based car sales reporting system (Marketing Solutions); and * Banque de France: cheque processing contract (Outsourcing). - Together, these contracts will generate £18m of annual new business in a full year, with the total value of the contracts over their lifetime being approximately £80m. - it is successfully selling new products, such as e-series and the new Motor Insurance database (used by police and the insurance industry to check whether vehicles are insured). e-series wins during the year include: * Camelot: identifying individuals and authenticating their age for Camelot's online lottery; and * ABTA: confirming the identity of individuals who purchase tickets or holidays remotely by credit card, either by phone or on the Internet. - it is growing by targeted acquisitions. Acquisitions made during the year, adding new skills, products or end markets include: * Cards Direkt (German loyalty card processing); * CNTP (French cheque processing); * Intact (UK web-based list joint venture); * Interface (Irish business information); and * Unclaimed Asset Register (data on UK unclaimed financial assets). After the period end, the remaining majority stake of a fraud management business was also acquired. The cost of all these acquisitions was £23m. As previously announced, from 1 April 2002, Experian International has taken responsibility from Reality for third party call centre and related activities, serving predominantly financial services clients. This enables the company to offer full business process outsourcing capabilities. ARGOS RETAIL GROUP Sales Operating profit 12 months to 31 March 2002 2001 2002 2001 £m £m £m £m Argos 2,847 2,387 204.0 160.8 Home Shopping UK & Ireland 1,533 1,540 33.1 25.1 Financial Services 11 - (4.8) 4.5 Home Shopping Continental Europe 238 322 22.4 21.7 Total 4,629 4,250 254.7 212.1 Operating margin 5.5% 5.0% Argos Retail Group (ARG) had another successful year, with sales up 9% and profit up 20%, generating a 0.5% improvement in the operating margin. The highlight of the year under review was Argos' performance (sales up 13% on a like-for-like basis). Profits at UK Home Shopping grew significantly while it continued to reduce marketing spend on unprofitable customers. Profits also rose in European Home Shopping. The major investment of £20m in Financial Services which has been taken through the profit and loss account has started to build a valuable long-term business, with over 625,000 Argos store card holders at the year end. Argos 12 months to 31 March 2002 2001 Change £m £m Sales* 2,847 2,387 19% Operating profit* 204.0 160.8 27% Operating margin 7.2% 6.7% * includes Argos Additions and jungle.com Argos had an excellent year, increasing sales by 19% and profit by 27%, generating a half point improvement in the operating margin. This performance was aided by strong consumer demand in the UK, which is expected to moderate in the current year. However, we are confident that Argos will continue to perform well in its markets as it pursues a programme of growth initiatives, aimed at improving choice, value and convenience for its customers. Excluding Argos Additions and jungle.com, Argos' sales increased by 17%, or 13% on a like-for-like basis. Argos grew share in all its major categories, with particularly strong performances from furniture, consumer electronics and electricals. Gross margins remained firm, helped by better buying and direct importing, which now accounts for 17% of sales (up from 12% two years ago). In the core chain, costs as a percentage of sales fell despite continued revenue investment, particularly in the supply chain programme. As previously outlined, Argos has a clear strategy for growth and has made good progress this year against its objectives: * it will increase the planned rate of store openings to about 35 per annum. At 31 March 2002, Argos had 490 stores, an increase of 18 in the year. Planned new stores for the current year should contribute about 4% to sales growth; * it will refurbish all remaining small stores by March 2004. To date, 175 store refurbishments have been completed. Sales uplifts provide a good return on investment, while customers benefit from greater convenience as in-store processes are improved; * it will further enhance choice for customers by extending the range of products and services offered to them. The current Spring/Summer catalogue has over 9,200 lines, a 7% increase on the same catalogue last year. The Autumn/Winter 2002 catalogue, launching in August, will have over 11,000 lines; * it is investing £120m over four years in its supply chain. In the year to March 2002 Argos has initiated its supply chain programme, by starting to build its new central and direct import warehouse, by opening the ARG Hong Kong buying office and implementing the first part of the new IT and software systems, improving stock and sales planning and forecasting. The full supply chain programme will yield benefits of about £50m per annum to invest in supporting margin or improving its value proposition. Pricing in the Spring/Summer 2002 catalogue on re-included lines was 2% below last year; and * it will grow capacity and improve customer service in Argos Direct, the delivery to home operation. Sales via Argos Direct grew by 50% compared to last year. It accounted for 16% of Argos' sales - up from 12% last year. Preparation for the construction of the new Argos Direct warehouse has started, with completion planned before the end of the current financial year. Following national rollout in January, sales at Argos Additions were £130m, up from £55m last year. The customer base has grown in line with expectations but average spend per customer has lagged, leading to further refinement of the offer in terms of product, credit and marketing to drive sales and profits. Jungle.com re-launched its website in February 2002 and completed the installation of new enterprise-wide systems in Autumn 2001. Despite cutting costs in personnel, overheads and IT, jungle.com made an operating loss in the full year, against a background of weak demand and pricing for computer products. Home Shopping UK and Ireland 12 months to 31 March 2002 2001 Change £m £m Sales 1,533 1,540 (1%) Operating profit 33.1 25.1 32% Operating margin 2.2% 1.6% UK Home Shopping has made further progress this year in creating a smaller, but more profitable agency business, while developing low risk opportunities in the growing direct market. As expected, sales for UK Home Shopping as a whole were down 1% on last year. Agency sales, which accounted for 80% of the total, were reduced by a further 2%. The active agency customer base fell, as planned, to 2.8m, with average spend per agency customer up 7% year on year. The main direct catalogues include Marshall Ward, Abound and Style Plus. Sales through these direct titles increased by 17% in the year, led by more seasonal and promotional catalogues from Marshall Ward and the successful launch of Abound in August 2001. Operating profit grew by about a third to £33.1m. Gross margins were unchanged on last year. Further cost savings totalling about £30m were made during the year in areas such as marketing, logistics, call centres and supply chain, in line with our plans to reduce annual fixed costs by £80m in total over the three years to March 2003. In the current financial year, in spite of a further planned reduction in agency sales, profit at UK Home Shopping will be underpinned by further cost savings and growing sales from direct catalogues. Financial Services 12 months to 31 March 2002 2001 £m £m Sales* 10.7 - Operating (loss)/profit (4.8) 4.5 * Sales represent interest income, fees and commissions relating to the Argos store card As previously indicated, about £20m was invested through the profit and loss account during the year, primarily in the launch of the Argos store card. This has progressed well. At 31 March 2002, there were over 625,000 account holders, of which about 460,000 were active. Balances outstanding were £105m and over 5% of Argos' total sales were financed during the year on the card. Argos personal loans were launched as planned in February 2002. Revenue investment spend on the development of Argos personal loans and the further growth of the Argos store card is expected to be about £15-20m in the year to March 2003. Profit increased from the remaining parts of Financial Services, including insurance and personal loans to Home Shopping customers, despite the decline in their numbers. Home Shopping Continental Europe 12 months to 31 March 2002 2001 Underlying change £m £m * Sales £m 238 322 5% Operating profit £m 22.4 21.7 0% Operating margin 9.4% 6.7% * at constant exchange rates, excluding disposals Following the disposal of our Austrian and Swiss home shopping businesses, which together generated sales of £94m in the year to March 2001 (2002: nil), Wehkamp now accounts for over 80% of European Home Shopping sales and profits. In the year to March 2002, sales in euros at Wehkamp increased by 5%, driven by a strong performance in branded clothing and publicity around Wehkamp's 50th birthday. Sales and profits in Halens, the Scandinavian operation, were slightly down, as the market remained highly competitive. e-commerce Across ARG, e-commerce sales continued to grow strongly to £164m, compared to £78m in the previous year. 3% of Argos' sales were over the Internet, while 12% of Wehkamp's sales were through its website. REALITY 12 months to 31 March 2002 2001 Change £m £m Sales to external customers 97 93 3% Sales to ARG 374 383 (2%) Total sales 471 476 (1%) Operating profit * 0.5 5.1 Operating margin ** 0.5% 5.5% * after charging £4m of restructuring charges in 2002 (2001: nil) ** operating profit as % of sales to external customers During the year to March 2002, Reality made further progress in reducing costs for ARG and generating third party business. Sales growth for external customers in the core logistics and call centre activities was over 10% in the year. Total reported sales to external customers grew by 3% as Reality withdrew from some non-core, unprofitable businesses such as vehicle servicing. In addition, there was a marked slowdown in market demand for web design services, where Reality has reduced costs significantly. The outstanding goodwill of £23m relating to the acquisition of Reality Solutions in May 2000 was written off at the end of the year. As previously stated, Reality is reporting into ARG from 1 April 2002, with Experian International taking responsibility for call centre and related activities, serving predominantly external financial services clients. As already announced, further cost efficiency programmes have identified over 300 redundancies, mainly in managerial and administrative positions. A £4m charge, associated with the cost of these redundancies, has been taken against Reality's operating profit in the year to March 2002. From 1 April 2002, Reality's external sales will be included in two divisions. The external logistics sales will be reported as a separate line under ARG, with the call centre and related activities sales becoming part of Experian International's Outsourcing business. For the year to March 2002, the split on this basis would have been £74m of external logistics sales within ARG and £23m in Experian International Outsourcing. The majority of the profit would have been included within ARG, predominantly in Home Shopping. BURBERRY 12 months to 31 March 2002 2001 Change Underlying change* £m £m Sales £m 499 425 18% 10% Operating profit £m 90.3 69.5 30% 21% Operating margin 18.1% 16.4% * at constant exchange rates, excluding the operations of Burberry's distributors based in Hong Kong, Singapore and Australia which were acquired on 1 January 2002 and adjusted for the pre-acquisition period for Spain, which was acquired in July 2000. During the year, Burberry grew revenue by 18% and operating profit by 30%. EBITDA grew by 30% to £104.3m. This was a strong performance, particularly in light of the difficult macro-economic environment, which adversely impacted many luxury goods companies. Operating margin increased by 1.7% to 18.1%, driven by gross margin improvement, a first time contribution from Asia (£4m) and growth in licensing revenue from Japan. During the year, Burberry continued to invest in the development of its retail network and its infrastructure. An analysis of revenue by product category, by distribution channel and by region is provided in Appendix Two. Product Each of Burberry's core product categories continued to grow during the year. With an increase of 28%, accessories led the group, contributing 25% of total revenue in the year. An expanded product range and wider distribution led to 23% growth in womenswear, which accounted for 33% of total revenue. Menswear sales also rose and now represent 30% of revenue. Retail Sales in Burberry's directly-operated retail stores were up 10% in total. During the year, it successfully opened six new stores and concessions in markets as diverse as Beverly Hills, California, SoHo in New York City and suburban Westchester County, New York. Including 7 stores and concessions acquired as part of the Asian transaction, Burberry had 69 retail stores, including 10 concessions in prestige department stores, at 31 March 2002. Eleven new and replacement stores are scheduled to open in the current financial year. These include flagship stores in New York City, Knightsbridge and Barcelona. Wholesale Sales to wholesale customers grew by 21%, with growth in all regions. The strength and appeal of the Burberry brand, the widening product range especially in accessories, coupled with the rollout of the Bond Street corner concept, has encouraged prestige retailers to continue to allocate prime space to Burberry products. As previously announced, with the Autumn/Winter 2002 wholesale order book now largely complete, sales for this season are expected to be broadly in line with those of a year ago. Demand from travel-related retailers has been influenced by the fact that the volume of international travel is recovering only slowly. Orders from Spain are also being affected as Burberry repositions in that market. Offsetting these factors, however, is continued strong growth in the United States where Burberry, it is believed, is still under-represented. Licensing revenue Licensing revenue in 2002 grew by 17%, mainly because of the brand's strength in Japan, its largest market. This growth at retail sales value has only a modest impact on the total reported revenue for Burberry because, under its licensing arrangements, Burberry receives a small percentage of the value of the products sold. Burberry's profit benefited substantially in 2002 from both the volume growth in Japan and the renewed licensing arrangements, under which the royalty rate increases each year up to 2006. The beneficial impact of this increase in 2003 is expected to be offset by the weakness of the yen relative to 2002 levels. Asia outside Japan With effect from 1 January 2002, Burberry completed the acquisition of the operations of its distributors based in Hong Kong, Singapore and Australia. Having contributed £4m to profits in the year to March 2002, it is expected to add incremental operating profit of £5m to £10m in the year to March 2003. In March 2002, Burberry signed an agreement to acquire its Korean distribution business, which primarily operates 45 retail concessions in prestige department stores. Burberry expects to complete this acquisition in early July 2002. The deal is expected to add approximately £5m to operating profit in its first twelve months. With these transactions, which are immediately earnings enhancing, Burberry has gained direct control in these important markets. It now has direct control of the distribution of its core products in all key markets outside Japan. SOUTH AFRICAN RETAILING 12 months to 31 March 2002 2001 Underlying £m £m change * Sales 123 150 2% Operating profit 30.9 30.7 25% Operating margin 25.2% 20.4% * at constant exchange rates Sales from our South African Retailing business were up by 2% in Rand, driven by effective marketing and merchandise strategies. This growth was achieved against a background of increasing unemployment and tough competition from other retailers on price and credit offers. Operating profit in Rand grew by 25% while operating margin improved by over four percentage points to 25%. This improvement was driven by growth in financial services, by cost saving initiatives and by a substantial reduction in bad debt costs resulting from more stringent credit and collection policies, which were developed in conjunction with Experian. The Rand weakened from an average rate of £1=R10.8 in 2001 to an average of R13.5 in 2002. This reduced reported sales by £30m and operating profit by £7.5m in the year. The closing rate at 31 March 2002 was R16.2. GUS has recently hedged the value of some of its South African Retailing assets against further currency risk. This is expected to increase the Group's interest charge by about £3m in the current financial year. FINANCE 12 months to 31 March 2002 2001 £m £m Operating profit* 15.1 20.2 * before exceptional costs in 2002 of £nil (2001: £13.1m), and net of funding costs General Guarantee Finance continued satisfactorily to wind down its loan book during the period, showing a reduction of £427m in the year. At 31 March 2002, GGF's outstanding advances, net of provisions, were £254m, of which £201m were funded by securitised debt. We anticipate collecting in the majority of GGF's outstanding advances by March 2003. PROPERTY 12 months to 31 March 2002 2001 £m £m Operating profit 24.8 29.6 The joint venture with British Land disposed of a further 103 properties in the year raising £177m. GUS' 50% share of operating profit declined £4.8m, largely reflecting a fall in rental income from sold properties. There was a compensating reduction in the Group's interest expense from the funds realised. The joint venture's portfolio of 149 remaining properties was valued at £814m at 31 March 2002. Further sales of these properties are planned in the current year. gusco.com 12 months to 31 March 2002 2001 £m £m Operating loss* (9.7) (12.6) * before exceptional losses of £2.1m (2001: £4.6m profit) Revenue spend during the year totalled £9.7m. This represented the funding of Group e-commerce ventures, mainly MyPoints Europe, a web-based loyalty scheme, breathe.com (now sold), and CreditExpert.com, a US consumer credit management business, whose results in the new financial year will be included within Experian North America. EXCEPTIONAL ITEMS 12 months to 31 March 2002 2001 £m £m Restructuring costs in Argos Retail Group/Reality (36.4) (30.5) (Loss)/profit on sale of e-commerce investments (2.1) 4.6 Loss on disposal of businesses (6.6) (50.3) Closure costs in GGF - (13.1) VAT refunds in UK Home Shopping - 4.6 (45.1) (84.7) Goodwill impairment (27.5) - Total charge (72.6) (84.7) Excluding the goodwill impairment, the total exceptional charge for the year amounted to £45.1m, a reduction of £39.6m from last year. The charge for the year comprises £8.7m relating to businesses or assets sold during the year and £36.4m of restructuring costs in ARG and Reality. Over the last two years, the latter have totalled £66.9m, in line with the expected costs announced in June 2000. This major programme has now been successfully completed. The balance of exceptional items is a one-off goodwill writedown of £27.5m, comprising £23.3m associated with Reality Solutions, the web design business, and £4.2m for Experian's credit business in Argentina. CASH FLOW AND INTEREST COSTS The Group's free cash flow during the year was £478m, in line with last year's £481m. After the payment of dividends, the repayment of securitised loans and acquisitions and disposals, there was a net cash outflow of £154m for the year, compared to an outflow of £77m last year. Net debt was £1,284m at 31 March 2002, excluding securitised loans. Interest costs were £4.5m lower than last year, partly due to the refinancing in mid November of the $800m bank loan, which was at a fixed rate of 6.4%. ACCOUNTING POLICIES This year we have adopted the new accounting standards on accounting policies (FRS 18) and deferred tax (FRS 19). Neither have had any material impact on reported profits or the balance sheet. The transitional disclosure requirements of FRS 17 (Retirement Benefits) have been adopted in the year, but these have no effect on the results announced here. Under FRS17 the net retirement benefit liability in the balance sheet at 31 March 2002 would be £17m higher than that provided for in the accounts. This should be seen in the context of total retirement benefit liabilities of over £700m. APPENDIX ONE Additional information on Experian Reported sales for Experian International 12 months to 31 March 2002 2001 Underlying £m £m change* Information - Credit 84 80 6% - Marketing 48 43 5% Total 132 123 6% Solutions - Credit 134 112 15% - Marketing 28 28 2% Total 162 140 12% Outsourcing 112 90 12% Discontinued activities/eliminations (2) 4 Reported sales 404 357 10% Reported sales for Experian North America 12 months to 31 March 2002 2001 Underlying $m $m change* Information - Credit 500 480 4% - Marketing 152 149 (4%) Total 652 629 2% Solutions - Credit 84 83 2% - Marketing 149 155 (4%) Total 233 238 (2%) Outsourcing 100 112 (11%) Discontinued activities 0 2 Reported sales 985 981 0% * Excluding acquisitions and disposals and at constant exchange rates APPENDIX TWO Additional information on Burberry Revenue by distribution channel 12 months to 31 March 2002 2001 Change £m £m Retail 157 144 10% Wholesale 289 235 21% Licensing 53 46 17% Revenue 499 425 18% Revenue by market (by destination) 12 months to 31 March 2002 2001 Change £m £m Europe 287 257 12% North America 110 91 21% Asia 100 75 34% Rest of World 2 2 - Revenue 499 425 18% Revenue by product category 12 months to 31 March 2002 2001 Change £m £m Womenswear 165 134 23% Menswear 149 140 6% Accessories 126 98 28% Other 6 7 - Licensing 53 46 17% Revenue 499 425 18% This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW FR EAFSNAFXAEEE

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