Preliminary Results

RNS Number : 0623U

Mulberry Group PLC

18 June 2009

 



MULBERRY GROUP PLC

18 June 2009 - Embargoed until 7am

MULBERRY GROUP PLC ('Mulberry' or the 'Group')

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2009

Mulberry Group plc, the AIM listed luxury brand announces sales growth of 14% to £58.6 million (2008: £51.2 million) and profit before tax of £4.2 million (2008: £5.2 million). This is the sixth successive year of sales growth, delivered during a period of significant economic challenge and uncertainty.

HIGHLIGHTS

• Sales increased by 14% to £58.6 million (2008: £51.2 million)

• UK retail sales growth of 15%, like for like growth of 2%   

• Wholesale sales increased by 15%

• Profit before tax ahead of market expectations at £4.2 million (2008: £5.2 million)

• Cash of £3.7 million (2008: £10.2 million)

• UK retail sales for the first 10 weeks of the current financial year up 26%, like for like up 21%

GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED:

'We have achieved another year of strong sales growth, delivering an increase of 14% for the year. These results reflect the continued investment in the brand. With our strong balance sheet we are well placed to continue to build Mulberry as a global brand. The current financial year has started well.'

FOR FURTHER DETAILS PLEASE CONTACT:

Pelham PR
David Wynne-Morgan	0207 337 1503
Gavin Davis	0207 337 1515
Kate Catchpole	0207 337 1512
Altium Capital
Ben Thorne	0207 484 4076
Melanie Szalkiewicz	0207 484 4187

Chairman's statement 

The Group has completed a successful year with sales growth of 14% to £58.6 million (2008: £51.2 million). Sales grew by 29% during the first half and then slowed from September 2008 running up to Christmas as the economic uncertainty intensified. Subsequently, UK wholesale and retail sales picked up strongly during the last two weeks of December 2008 and continued to show good growth compared to the prior year through to 31 March 2009.

The result of this last quarter performance in the UK was that profit before tax was ahead of market expectations at £4.2 million (2008: £5.2 million). A final dividend of 2 pence per share will be recommended for approval by shareholders (2008: 2 pence).

We continued to invest in the business both in the UK and internationally, using retained profits and cash flow to invest in new shops, developing new products, strengthening the management team and increasing expenditure on marketing. This strategy has enabled the Group to continue to grow and increase market share despite demanding market conditions.

The Group's balance sheet is strong with no debt. Stocks have risen due to growth in the business and because production and purchases were planned and committed in anticipation of higher sales before the downturn in the economy. Production and purchases have been adjusted for the forthcoming year and the benefits of this are expected to flow through as a reduction in working capital and an increase in cash. The Group's positive cash position means that it is able to continue to pursue its growth objectives.

BUSINESS REVIEW

The business has continued to perform well despite the global slowdown. While Mulberry's performance has been strong, the Group has not been immune to broader market conditions. Starting in mid-September 2008, sales slowed in all markets, but the pattern was not uniform with the USA being hardest hit.

Trading in the UK was variable but sales returned to healthy growth during the last two weeks of December 2008 and this was sustained through to the financial year end. We resisted pressure from other retailers to go on sale early resulting in planned margins being achieved during the important Christmas period. The upturn in sales performance coincided with the introduction within our Spring 2009 collection of the Mitzy family of bags which have become immediate best sellers. We have also benefited from an increase in demand from tourists, particularly in London, due to the weaker pound. Accessories remain our core business and continue to account for over 90% of Group sales. Handbags have continued to be the mainstay of the accessories business.

In the UK we opened shops in Leeds and the new Westfield development in west London. Our UK retail business grew by 15% during the year and like for like shop sales increased by 2%. Online sales grew by 38% year on year helped by the introduction of a US dollar denominated site during November 2008 and a Euro denominated site during February 2009. Our online presence has become a key channel for the development of Mulberry as a modern global luxury brand.

The Group's wholesale sales for the year grew by 15%. Growth slowed during the second half as buyers became increasingly cautious; however, our order book for the Spring Summer 2009 season grew by 3% compared to the prior year.

In Asia, our Korean business with our partner SHK continues to make good progress with the opening of a further department store shop in shop, bringing the total to six plus two duty free outlets. As previously reported, the arrangements with our Japanese partner finished during January 2009. Since that date, we have been working directly with the influential Isetan department store in Tokyo. Our business with our partner Club 21 in the rest of Asia continues satisfactorily.

In Europe, our partners opened 2 new shops in Athens and Copenhagen Airport during the financial year. While in the Middle East, our partners opened 2 new shops in Dubai and Kuwait.

CURRENT TRADING AND OUTLOOK

Our UK shops have continued to perform well since the financial year end. During the first ten weeks of the current financial year, total retail sales in the UK were 26% above prior year with like for like sales up 21%. A pattern has developed with like for like sales in our full price shops increasing by 11% and in our off price stores by 45%. This growth in sales has been due to continued demand for the Group's products combined with the success of the new Mitzy family of bags and increased demand from tourists. Despite this, we remain cautious given the weak domestic economy.

Our wholesale customers remain very cautious and this is reflected in their reduced buying budgets. This is despite the fact that the sell through of Mulberry products remains strong. We have planned on the basis of third party wholesale orders dropping year on year by approximately 15% for the Autumn Winter 2009 season and 4% for Spring Summer 2010 season.

During the year to 31 March 2010, our international partners are scheduled to open three further shops in Athens, Qatar and Helsinki Airport respectively.

In Asia, our Korean partner continues to perform well and opened another department store shop in shop during May 2009 bringing the total to seven plus two duty free outlets. One further shop in shop is planned for Korea in early 2010.

As announced on 14 May 2009, we have reached an agreement with our joint venture partner in the USA to take full control of the wholesale and retail business in the US. Our retail operation will be focused on the two shops in New York and the wholesale business which will be controlled by the Mulberry team in London. This will allow the US website which is operated from the UK to be integrated with the rest of the US business, which in turn will simplify marketing and administration. The arrangement has been agreed in principle and is subject to the completion of legal formalities. In the meantime Mulberry assumed management control of these US operations from 1 April 2009.

As previously reported, we have outgrown our existing London premises and are continuing to work on a project to relocate our London offices and showrooms during 2010.

Overall we have made a very positive start to the current financial year. However, we remain cautious due to the uncertain economic climate. 

 DIVIDEND

The Board is recommending the payment of a dividend on the ordinary shares of 2 pence per share (2008: 2 pence) which will be paid on 21 August 2009 to ordinary shareholders on the register on 24 July 2009.

STAFF

I would like to thank all of our staff for their enthusiasm and commitment which are so important to the brand's future development. The achievements of the last year are a direct result of their efforts and would not have been possible without them.

Godfrey Davis

Chairman and Chief Executive

17 June 2009

 Financial review

Gross margin

The Group's gross profit as a percentage of revenue has remained consistent with the prior year at 60%. Although some pressure on costs was experienced due to the devaluation of sterling, this has been counteracted by the increase in the proportion of retail sales to wholesale sales, which carry a higher margin.

NET OPERATING EXPENSES

Net operating expenses for the year increased by £5.4 million to £31.2 million (2008: £25.8 million). This increase reflects £2.1 million of additional costs associated with expanding the retail network, £1.5 million increase in employee costs, £0.8 million of extra marketing investment in building the international Mulberry brand and £0.2 million incurred with the reorganisation of the US business. This reflects our investment in growing the Group and providing a firm foundation for the future.

FINANCE INCOME AND EXPENSE

The decrease in net finance income of £0.1 million has resulted from the fall in interest rates achieved on cash held on deposit and through the decrease in cash balances held on deposit throughout the year.

Taxation

The Group reported an effective tax rate of 38.2% (2008: 33.7%), resulting in a tax charge of £1.6 million (2008: £1.8 million). The increase in the effective rate compared to the prior year is due to the withdrawal of Industrial Building Allowances (3.1%) and the non-deductible expense for share based payments (1.4%). The accounting for the withdrawal of Industrial Building Allowances under IFRS gives rise to a one-off deferred tax expense.

Balance Sheet

Capital expenditure on tangible fixed assets for the year totalled £2.4 million (2008: £2.6 million) and included the fit out of the new stores opened during the year. The expenditure of £0.4 million on intangible fixed assets reflects the ongoing investment in the Group's new ERP system, the retail module of which was rolled out during February 2009.

Stock levels have increased by £7.0 million to £14.8 million (2008: £7.8 million) resulting from the growth of the business and the impact of sales falling below expectations during the second half of the year. Purchasing decisions are made six months in advance of the selling season and therefore when sales declined during the autumn of 2008, the inflow of goods could not be stemmed in the short term. Purchases have been adjusted to reflect the current trading conditions and with the objective of reducing stocks to normal levels by the end of the current financial year.

Cashflow

The principal source of funds was cash generated from operations which amounted to £6.2 million (2008: £6.1 million) during the year before changes in working capital. The net cash balance has reduced to £3.7 million (2008: £10.2 million) due primarily to the extra investment in stock.

Shareholder return

The basic earnings per share for the year declined by 25% to 4.5p (2008: 6.0p). This reflects the 19% reduction in pre-tax profit and the significant increased tax charge explained above.  

Roger Mather

Group Finance Director

17 June 2009

  Consolidated income statement

Year ended 31 March 2009

		2009		2008
		£'000		£'000
Revenue		58,585		51,174
Cost of sales		(23,449)		(20,622)
Gross profit		35,136		30,552
Administrative expenses		(31,627)		(25,979)
Other operating income		421		201
Operating profit		3,930		4,774
Share of results of associates		34		63
Finance income		229		473
Finance expense		(16)		(124)
Profit before tax		4,177		5,186
Tax		(1,596)		(1,750)
Profit for the year		2,581		3,436
Attributable to:
Equity holders of the parent		2,581		3,436
		pence		pence
Basic earnings per share		4.5		6.0
Diluted earnings per share		4.5		6.0
Consolidated statement of recognised income and expense
Year ended 31 March 2009
		2009		2008
		£'000		£'000
Profit for the year		2,581		3,436
Exchange differences on translation of foreign operations		278		309
Total recognised income and expense for the year		2,859		3,745
Attributable to:
Equity holders of the parent		2,859		3,745

  Consolidated balance sheet

At 31 March 2009

	2009		2008
	£'000		£'000
Non-current assets
Intangible assets	2,527		2,095
Property, plant and equipment	8,872		8,454
Interests in associates	295		242
	11,694		10,791
Current assets
Inventories	14,830		7,785
Trade and other receivables	6,032		5,548
Cash and cash equivalents	3,710		10,237
	24,572		23,570
Total assets	36,266		34,361
Current liabilities
Trade and other payables	(10,726)		(10,894)
Current tax liabilities	(1,024)		(917)
Obligations under finance leases	-		(10)
	(11,750)		(11,821)
Non-current liabilities
Deferred tax liabilities	(132)		(17)
Obligations under finance leases	-		(4)
	(132)		(21)
Total liabilities	(11,882)		(11,842)
Net assets	24,384		22,519
Equity
Share capital	2,871		2,871
Share premium account	7,007		7,007
Own share reserve	(49)		-
Revaluation reserves	-		18
Capital redemption reserve	154		154
Special reserve	1,467		1,467
Foreign exchange reserve	493		215
Retained earnings	12,441		10,787
Total equity	24,384		22,519

  Consolidated cash flow statement

At 31 March 2009

	2009		2008
	£'000		£'000
Operating profit for the year	3,930		4,774
Adjustments for:
Depreciation of property, plant and equipment	1,723		1,231
Amortisation of intangible assets	217		137
Loss on sale of property, plant and equipment	287		12
Effects of foreign exchange	(117)		(61)
Share based payments charge/(credit)	203		(5)
Operating cash flows before movements in working capital	6,243		6,088
Increase in stocks	(7,045)		(1,097)
Increase in debtors	(484)		(1,679)
(Decrease)/increase in creditors	(205)		2,772
Cash (used in)/generated by operations	(1,491)		6,084
Corporation taxes paid	(1,374)		(1,685)
Interest paid	(16)		(121)
Preference dividends paid	-		(56)
Net cash (outflow)/inflow from operating activities	(2,881)		4,222
Investing activities:
Interest received	229		473
Purchases of property, plant and equipment	(2,313)		(2,418)
Proceeds from sale of property, plant and equipment	11		32
Acquisition of intangible fixed assets	(362)		(389)
Net cash used in investing activities	(2,435)		(2,302)
Financing activities:
Dividends paid	(1,148)		(861)
Repayments of borrowings	-		(1,250)
Repayments of obligations under finance leases	(14)		(50)
Proceeds on issue of shares	-		207
Investment in own shares	(49)		-
Net cash used in financing activities	(1,211)		(1,954)
Net decrease in cash and cash equivalents	(6,527)		(34)
Cash and cash equivalents at beginning of year	10,237		10,271
Cash and cash equivalents at end of year	3,710		10,237

Notes

1.    Basis of preparation

The financial information in this announcement, which was approved by the Board of Directors on 17 June 2009, does not constitute the Company's statutory accounts for the year ended 31 March 2009 or the year ended 31 March 2008, but is derived from these accounts.

Statutory accounts for the year ended 31 March 2008 have been delivered to the Registrar of Companies and those for the year ended 31 March 2009 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

Whilst the financial information included in this preliminary announcement has been completed in accordance with International Financial Reporting Standards (IFRS), this announcement itself does not contain sufficient information to comply with IFRS.

2.    Accounting policies    

The Group's financial statements for the year ended 31 March 2009 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union.

3.    Earnings per share

Basic earnings per ordinary share has been calculated by dividing the profit for the year by 57,419,505 (2008: 56,968,275) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share has been calculated by dividing the profit for the year excluding the interest and finance costs relating to the preference shares by 57,438,950 (2008: 57,832,347) potential ordinary shares. These shares take into account the exercise of unexercised dilutive options and the diluting effect of the preference shares prior to their conversion during April 2007.

The weighted average number of ordinary shares in issue during the year includes those held by the Mulberry Group Plc Employee Share Trust.

4.    Dividends

The dividends approved and paid during the year are as follows:

	2009		2008
	£'000		£'000
2.0p (2008: 1.5p) per share on 5p ordinary shares	1,148		861

The Directors are recommending the payment of a final dividend of 2.0p per ordinary share (2008: 2.0p) to be paid on 21 August 2009 to ordinary shareholders on the register as at 24 July 2009. This proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

5.    Information

Copies of the Annual Report and Financial Statements will be posted to shareholders. Further copies can be obtained from Mulberry Group plc's registered office at The Rookery, Chilcompton, Somerset, BA3 4EH.

Copies of this announcement are available for a period of one month from the date hereof from the Company's registered office, and from the Company's nominated adviser, Altium Capital Limited, 30 St James's Square, London, SW1Y 4AL.

 

END

 

 

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