Preliminary Results

Mulberry Group PLC 21 June 2007 MULBERRY GROUP PLC 21 JUNE 2007 MULBERRY GROUP PLC ('Mulberry' or the 'Group') PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2007 Mulberry Group Plc, the AIM listed luxury brand, announced pre-tax profits of £6.2 million and a 50% increase in the dividend payment, continuing the improved performance of recent years. GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: 'We have built on the exceptional sales and profit growth achieved last year delivering an 8.5% increase in operating profit. There will be a dividend of 1.5 pence per share. The trading outlook is positive and with the substantial cash balances generated in the last two years, Mulberry has the resources to invest in building a global brand.' HIGHLIGHTS • Operating profit increased by 8.5% to £6.7 million (restated 2006: £6.2 million) • Net cash £9.0 million (2006: £7.3 million) • Dividend increased by 50% to 1.5 pence per ordinary share (2006: 1.0 pence) • Current trading outlook positive FOR FURTHER DETAILS PLEASE CONTACT: WMC Communications David Wynne-Morgan 0207 930 9030 Teather & Greenwood Limited Mark Dickenson 0207 426 9000 CHAIRMAN'S STATEMENT The Group has continued to make progress building on the substantial sales and profit growth achieved last year. Operating profit increased by 8.5% to £6.7 million (restated 2006: £6.2 million). Strong cash generation from operations of £7.9 million (2006: £8.0 million) resulted in cash balances increasing by £1.7 million. This was after financing capital expenditure of £3.8 million and the dividend on ordinary shares of £0.5 million (1 pence per share paid in August 2006). A final dividend of 1.5 pence per share is being recommended (2006: 1.0 pence). Sales for the year increased by 4% to £45.1 million (2006: £43.4 million). Gross profit margin increased from 56.4% to 58.2%. Margins improved due to the increased proportion of sales at retail prices through the Group's own shops. Operating expenses increased by £1.2 million reflecting the costs of the expanded retail network and increased investment in marketing, people and infrastructure to support the future growth of the business. The associated company losses include the Group's share of the start up losses of Mulberry USA LLC which were $1 million (£0.5 million), the equivalent of the Group's investment. At 31 March 2007, the Group had net cash on hand and at bank of £9.0 million (2006: £7.3 million). The Group has term loan and overdraft facilities of £7.5 million with its principal bankers HSBC Bank plc. The Group made a profit on ordinary activities before tax for the year of £6.2 million (restated 2006: £6.1 million). BUSINESS REVIEW Accessories, which are our core business, continue to account for over 90% of Group sales. The exceptional sales growth in the previous year to 31 March 2006 was fuelled by the huge success of the Roxanne and Bayswater handbags. In the year to 31 March 2007, we have consolidated the sales increase and developed a broader product base for the next stage of growth and to meet the specific requirements of new markets. We continued to work to improve our control of the UK market. This involved a reduction in wholesale accounts and expansion of our own retail network where we have direct control over the presentation of our brand to the consumer. We opened a shop in Heathrow Terminal 3 and nine new concessions in House of Fraser department stores, taking the total to fifteen. In addition, as announced on 5 December 2006, we acquired the Mulberry shop in Brompton Road which had been run as a franchise. For the 52 weeks to 31 March 2007 sales in our UK shops, which benefited from the full year trading of the shops opened last year and the new openings this year, increased by 28% and like for like sales, for the same period, increased by 10%. In Europe, we acquired the lease on a shop of approximately 1,000 square feet, in Rue St Honore, Paris, which opened at the beginning of March. The lease premium of Euro 2 million, with the associated purchase costs, is shown as an intangible asset in our balance sheet. In Scandinavia, our profitable associated company, Mulberry Oslo AS successfully relocated the Mulberry shop in Oslo. In the USA, our associate company, Mulberry USA LLC, opened four shops between November 2006 and March 2007. The shops are at: 605 Madison Avenue and Bleeker Street in New York; Americana Mall, Long Island; and Melrose Place, Los Angeles. We demonstrated the opportunity for Mulberry in the American market in 2006, when we developed good sales at wholesale of our Roxanne and Bayswater bags. This justified the decision to pursue our strategy of opening our own shops to establish consumer demand for the whole Mulberry brand and not just a few selected products. This has resulted in a substantial reduction in our wholesale business in the USA this year. I believe our strategy is correct and the benefits of creating our own chain of Mulberry shops will come through in the years ahead. In Asia, the shops run by our distribution partner, Club 21, continue to develop satisfactorily and the shop opened in Orchard Road, Singapore has made a good start. In Japan, there have been no significant developments. The overall impact of these relatively complex changes in sales mix and focus during the year was that the sales of our own shops and website increased by 26% and our shipments to third parties reduced by 13%, compared to the previous year. During the year, the Group's Somerset head office moved to new offices at the Rookery factory site. This move completed the rationalisation of the Group's UK facilities, significantly improving communication and providing space for future expansion. CURRENT TRADING AND OUTLOOK We are entering a new phase of development of the Mulberry brand with emphasis on international development. This will involve a material increase in marketing spend for the foreseeable future to increase customer awareness and desire for Mulberry globally. In the next year, the main focus will be the USA combined with additional expenditure in Asia and Europe. We have budgeted to increase our total expenditure on marketing from £3.0 million last year to £4.9 million. The Group has the resources to undertake this market development activity having generated substantial cash balances from profit over the last two years. In the USA, our associate company opened a fifth shop in Atlantic City in May. In Asia, our partners plan to open a second larger shop in Hong Kong. This remains on target to open before Christmas. In Korea, our partner plans to open two department store shop in shops during the next year, bringing the total to three. We plan to continue to expand our retail presence in the UK as opportunities arise. A new shop in Stansted airport will open in the next couple of months followed by a shop in Glasgow in the autumn. Our shop in Heathrow Terminal 5 is under construction and will start to trade in the next financial year when the terminal opens. Our retail sales in the UK, for the first ten weeks of the new financial year, are up by approximately 31% and like for like sales in the same period are up by approximately 9%. B PREFERENCE SHARES As announced on 17 April 2007 the 8,000,000 B preference shares, held by Challice Limited were converted to ordinary shares on a one for one basis as the conditions for conversion had been met. DIVIDENDS The Board is recommending the payment of a dividend on the ordinary shares of 1.5 pence per share (2006: 1.0 pence) which will be paid on 15 August 2007. The final dividend on the B preference shares for the period from 1 January 2007 up until they were converted of £56,000 will be paid on 30 June 2007. 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 21 June 2007 Contacts: WMC Communications David Wynne-Morgan or Tim Weller 0207 930 9030 Teather & Greenwood Limited Mark Dickenson or Fred Walsh 0207 426 9000 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 March 2007 2007 2006 £'000 £'000 Restated see note 2 TURNOVER 45,078 43,406 Cost of sales (18,818) (18,912) ---------- ---------- GROSS PROFIT 26,260 24,494 Other operating expenses (net) (19,578) (18,337) ---------- ---------- OPERATING PROFIT 6,682 6,157 Group share of (loss)/profit of associated undertakings (498) 95 Interest receivable and similar income 324 163 --------------------------------------------------------------------------------------------------------------------- Finance costs on preference shares (249) (249) Other interest payable and similar charges (49) (31) --------------------------------------------------------------------------------------------------------------------- Interest payable (298) (280) ---------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 6,210 6,135 Taxation on profit on ordinary activities (2,222) (1,304) ---------- ---------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION, BEING PROFIT FOR THE FINANCIAL YEAR 3,988 4,831 ---------- ---------- EARNINGS PER ORDINARY SHARE - basic 8.14p 9.89p ========== ========== - diluted 7.38p 8.77p ========== ========== CONSOLIDATED BALANCE SHEET 31 March 2007 2007 2006 £'000 £'000 Restated see note 2 FIXED ASSETS Intangible assets 1,499 - Tangible assets 7,085 5,228 Investments 152 730 ---------- ---------- 8,736 5,958 ---------- ---------- CURRENT ASSETS Stocks 6,688 5,967 Debtors 3,869 5,239 Cash at bank and in hand 10,271 7,282 ---------- ---------- 20,828 18,488 CREDITORS: Amounts falling due within one year (8,619) (8,415) ---------- ---------- NET CURRENT ASSETS 12,209 10,073 ---------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 20,945 16,031 CREDITORS: Amounts falling due after more than one year (3,841) (2,579) Provisions for liabilities (53) - ---------- ---------- NET ASSETS 17,051 13,452 ========== ========== CAPITAL AND RESERVES Called-up share capital 2,474 2,467 Share premium account 4,633 4,547 Revaluation reserve 49 80 Capital redemption reserve 154 154 Special reserve 1,467 1,467 Profit and loss account 8,274 4,737 ---------- ---------- SHAREHOLDERS' FUNDS 17,051 13,452 ========== ========== CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 March 2007 2007 2006 £'000 £'000 7,926 7,958 NET CASH INFLOW FROM OPERATING ACTIVITIES Returns on investments and servicing of finance 85 (655) Taxation (1,987) (550) Capital Expenditure (3,842) (1,543) Equity dividends paid (490) - ---------- ---------- Cash inflow before financing 1,692 5,210 Financing 1,297 (111) ---------- ---------- INCREASE IN CASH IN THE YEAR 2,989 5,099 ========== ========== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 2007 2006 £'000 £'000 2,989 5,099 Increase in cash in the year Cash (outflow)/inflow from increase in debt and lease financing (1,207) 145 ---------- ---------- 1,782 5,244 Other non-cash changes Inception of finance leases - (73) Preference shares (50) (50) ---------- ---------- Movement in net funds 1,732 5,121 NET FUNDS/(DEBT), BEGINNING OF YEAR 4,661 (460) ---------- ---------- NET FUNDS, END OF YEAR 6,393 4,661 ========== ========== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 March 2007 2007 2006 £'000 £'000 Profit for the financial year 3,988 4,913 Currency translation differences on foreign currency net investments (94) (9) ---------- ---------- Total recognised gains in the year 3,894 4,904 ---------- ========== Total recognised gains related to the year as above 3,894 Prior period adjustment (as explained in note 2) (82) ---------- Total gains recognised since the last annual report 3,812 ========== CONSOLIDATED NOTE OF HISTORICAL COST PROFITS AND LOSSES For the year ended 31 March 2007 2007 2006 £'000 £'000 Restated see note 2 Reported profit on ordinary activities before taxation 6,210 6,135 Difference between historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount 31 31 ---------- ---------- Historical cost profit on ordinary activities before taxation 6,241 6,166 ========== ========== Historical cost profit for the year after taxation 4,019 4,862 ========== ========== NOTES 1. The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 March 2007 and 2006, but is derived from those financial statements. Statutory accounts for the year ended 31 March 2006 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2007 will be filed at Companies House upon receiving the approval of the Annual General Meeting. The auditors have reported on the accounts for the year ended 31 March 2006 and their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. ACCOUNTING POLICIES The results for the year ended 31 March 2007 contained in this report have been prepared using accounting policies consistent with those used in the preparation of the annual report and accounts for the year ended 31 March 2006 with the exception of the adoption of FRS 20 'Share based payments'. The company has applied the requirements of FRS 20 to all grants of equity instruments after 7 November 2002 that were unvested at 1 April 2006 and to all grants of equity instruments subsequent to that. The Group issues equity-settled share based payments to certain employees. Equity-settled share based payments are measured at fair value (excluding the effect on non market based vesting conditions) at the date of grant. The fair value as determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period or the period to which the service relates, based on the company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The effects of this change in policy are summarised below: 2007 2006 £'000 £'000 Profit and loss account Administrative expenses 102 82 ------- ------- Decrease in profit for the financial year 102 82 ======= ======= As the charge taken in the profit and loss account is allocated to the profit and loss reserve there is no impact on net assets. 3. Basic earnings per ordinary share has been calculated by dividing the profit on ordinary activities after taxation for each financial year by 48,974,442 (2006: 48,833,591) 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 on ordinary activities after taxation excluding the interest and finance costs relating to the preference shares for each financial year by 57,381,528 (2006: 57,909,182) potential ordinary shares taking account of the potential conversion of the preference shares and exercise of unexercised options. 4. 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, The Rookery, Chilcompton, Somerset, BA3 4EH and from the Company's nominated adviser, Teather & Greenwood Limited, Beaufort House, 15 St Botolph Street, London, EC3A 7QR. This information is provided by RNS The company news service from the London Stock Exchange

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