Interim Results
Mulberry Group PLC
07 December 2006
MULBERRY GROUP PLC ('Mulberry' or the 'Group')
7 DECEMBER 2006
Mulberry Group Plc, delivered a 10% increase in operating profit for the first
half to £2.5 million (2005: £2.2 million).
HIGHLIGHTS
• Sales for the six months to 30 September 2006 increased by 8% to
£20.7 million (2005: £19.1 million)
• Gross profit margin increased to 56.5% (six months to 30 September
2005: 54.0%)
• The Group has continued to generate cash from operations in the last six
months and had cash at bank of £7.0 million (30 September 2005: £3.8 million)
• Mulberry USA LLC opens first Mulberry shop in USA.
GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: 'As projected, Mulberry
has grown at a more moderate pace, in this period, while we consolidate the
exceptional sales advances that we made last year. This will create the platform
for the next stage of the development of Mulberry as a global brand.'
Enquiries
WMC Communications Ltd Tel: 0207 930 9030
David Wynne-Morgan or
Charlie Geller
MULBERRY GROUP PLC ('Mulberry' or the 'Group')
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2006
CHAIRMAN'S STATEMENT
The Group has continued to make progress. Sales for the six months to 30
September 2006 increased by 8% to £20.7 million (2005: £19.1 million). Operating
profit increased by 10% for the first half to £2.5 million (2005: £2.2 million).
Gross profit margin increased to 56.5% (six months to 30 September 2005: 54.0%).
Operating expenses increased by £1.1 million. This reflects the costs associated
with two new standalone shops and six new concessions that have opened in the
eighteen months, increased marketing and investment in the infrastructure and
people to sustain the continued growth of our business.
Mulberry USA LLC has incurred losses primarily due to up front recruitment
costs, rent and other pre-trading costs related to the first five Mulberry shops
in the USA. The Group's share of the loss of Mulberry USA LLC for the period to
30 September 2006 is £0.2 million which is accounted for in the profit and loss
account within the results of associated undertakings.
The Group's cash position continues to be strong with cash generated from
operating activities before tax and capital expenditure of £2.8 million (2005:
£2.2 million). At 30 September 2006, the Group had cash at bank of £7.0 million
(30 September 2005: £3.8 million). The Group has unutilised term loan and
overdraft facilities of £7.5 million.
BUSINESS REVIEW
Our emphasis in the current year is to continue the development of Mulberry as a
global brand. As explained in the final results announcement in June 2006, the
growth in sales this year will be modest as we digest and consolidate the
substantial gains made last year.
Accessories, which account for over 90% of Group sales, continue to be the
primary focus in all markets. The accessory third party order book for the
Autumn/Winter season finished 4% ahead of the prior year order book.
The Group's standalone retail shops and department store concessions comprised
45% of Group sales in the six month period to 30 September 2006. Total retail
sales of our own shops increased by 19%. This reflected sales growth of 7% in
our like for like UK shops and the sales from new shops, including the free
standing shop in Edinburgh and new department store concessions in House of
Fraser.
CURRENT TRADING AND OUTLOOK
The current year is expected to show modest sales growth as we consolidate the
substantial gains achieved last year. We expect this process to continue for the
remainder of the year to 31 March 2007.
In the UK, we plan to open new shops in Glasgow and Terminal 3 at Heathrow. The
latter has been a long term objective in view of the success of our shops in
Terminals 1 and 4. In addition, we are one of the first brands to agree space in
the new Terminal 5, which will open in 2008. We will complete the process of
converting our business with House of Fraser from wholesale to concessions
managed by our retail team. Like for like retail sales in our UK shops and
concessions for the nine weeks to 2 December were 7% higher than the prior year
comparative period.
The Mulberry shop at 171-175 Brompton Road, London, was being run as a franchise
by a company under the same ultimate control as Challice Limited, which owns
53.5% of the ordinary shares in Mulberry Group plc. As announced on 5 December
2006, we have acquired this shop which will be consolidated into our own retail
business.
In Europe, we have purchased the lease of a shop in Rue St Honore, Paris for €2
million. The total investment, including shop fit will be in the region of €3
million by the time the shop opens next Spring.
Mulberry USA LLC opened the first USA shop in Bleecker Street, New York, on 17
November 2006. Three further shops are due to open before Christmas. These are:
a flagship at 605 Madison Avenue, New York; Americana Mall, Long Island; and
Melrose Place, Los Angeles with a fifth shop planned for The Pier at Caesar's,
Atlantic City in Spring 2007. The wholesale business in the USA, which was
largely based on the phenomenal success of the Roxanne bag, will reduce as the
team focus on building awareness of the brand showing the full Mulberry
experience in our new shops. Due to the timing and quantity of the shop
openings, we expect the pre-trading and start up costs in the USA to generate
losses that will result in a full write down of our investment.
The conditions for the conversion of the 8,000,000 B preference shares into
ordinary shares, on a one for one basis, at the option of the holder Challice
Limited, will have been met when these shops are opened by Mulberry USA LLC. If
the B preference shares are not converted by 11 September 2008 they will be
redeemed by the Company at 35 pence per share.
In Asia, our partners have opened a shop in Orchard Road, Singapore and agreed
the lease on a second larger shop in Hong Kong, which is planned to open before
Christmas 2007.
There are no major developments to report in Japan over the last six months.
In Korea, our partners have opened a Mulberry fitted space in The Galleria
department store which is trading well and expect to open in another department
store in the Spring.
Historically, our marketing and advertising expenditure has been focused on the
UK and Europe. In view of the pace of international shop openings, we plan to
spend more on advertising in the Spring with the objective of increasing
consumer awareness of our unique brand in all our markets.
DIVIDENDS
The dividend of 1 penny per ordinary share, announced with the final results in
June 2006 was paid in August 2006. The Board has adopted a progressive dividend
policy in respect of the ordinary shares. A dividend for the current year will
be considered in June 2007 when the results are available. The Board is not
recommending the payment of an interim dividend on the ordinary shares.
The dividend on the B preference shares of £196,000 per annum is paid in two
instalments, on 30 June and 31 December each year.
STAFF
The continued progress of our brand is the direct result of the perseverance and
energy of our people. I would like to take this opportunity to thank them all.
Godfrey Davis
Chairman and Chief Executive
7 December 2006
Contacts:
WMC Communications
David Wynne-Morgan or Charlie Geller 020 7930 9030
Teather & Greenwood Limited
Mark Dickenson or Fred Walsh 020 7426 9000
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30.09.06 30.09.05 31.03.06
Restated Restated
Note £'000 £'000 £'000
TURNOVER 20,655 19,141 43,406
Cost of sales (8,984) (8,811) (18,912)
GROSS PROFIT 11,671 10,330 24,494
Other operating expenses (net) (9,203) (8,094) (18,337)
OPERATING PROFIT 2,468 2,236 6,157
Group share of profit/(loss) of associated undertakings (234) (18) 95
Interest receivable and similar income 137 49 163
Finance costs on preference shares (125) (125) (249)
Other interest payable and similar charges (15) (17) (31)
Interest payable and similar charges (140) (142) (280)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,231 2,125 6,135
Tax on profit on ordinary activities 2 (758) (573) (1,304)
PROFIT FOR THE PERIOD 1,473 1,552 4,831
Earnings per share for the period - basic 3.0p 3.2p 9.9p
Earnings per share for the period - diluted 2.8p 2.9p 8.8p
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30.09.06 30.09.05 31.03.06
Note £'000 £'000 £'000
FIXED ASSETS INCLUDING INVESTMENTS 6,658 5,086 5,958
CURRENT ASSETS
Stocks 6,508 5,576 5,967
Debtors 5,605 5,780 5,239
Cash at bank and in hand 6,959 3,774 7,282
19,072 15,130 18,488
CREDITORS: Amounts falling due within one year (8,648) (7,554) (8,415)
NET CURRENT ASSETS 10,424 7,576 10,073
TOTAL ASSETS LESS CURRENT LIABILITIES 17,082 12,662 16,031
CREDITORS: Amounts falling due after more than one year (2,584) (2,529) (2,579)
NET ASSETS 14,498 10,133 13,452
CAPITAL AND RESERVES
Called up share capital 2,471 2,463 2,467
Reserves 12,027 7,670 10,985
SHAREHOLDERS' FUNDS 14,498 10,133 13,452
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30.09.06 30.09.05 31.03.06
Note £'000 £'000 £'000
Restated Restated
Operating profit 2,468 2,236 6,157
Depreciation, impairment charge and loss on disposal 501 473 1,182
FRS20 share based payment 51 41 82
Increase in stocks (541) (197) (588)
Increase in debtors (366) (2,258) (1,483)
Increase in creditors 684 1,867 2,608
NET CASH INFLOW FROM OPERATIONS 2,797 2,162 7,958
Returns on investments and servicing of finance 24 32 (655)
Ordinary dividends paid (490) - -
Taxation (987) - (550)
Capital expenditure (1,707) (505) (1,543)
NET CASH INFLOW / (OUTFLOW) BEFORE FINANCING (363) 1,689 5,210
Financing 39 (99) (111)
(DECREASE) / INCREASE IN CASH IN THE PERIOD (324) 1,590 5,099
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS / DEBT
(Decrease) / increase in cash in the period (324) 1,590 5,099
Cash outflow from decrease in debt and lease finance 21 110 145
(303) 1,700 5,244
Other non-cash changes
Inception of finance leases - (39) (73)
Preference shares (25) (25) (50)
Movement in net debt (328) 1,636 5,121
NET FUNDS / (DEBT) AT BEGINNING OF PERIOD 4,661 (460) (460)
NET FUNDS AT END OF PERIOD 4,333 1,176 4,661
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30.09.06 30.09.05 31.03.06
Restated Restated
£'000 £'000 £'000
Profit for the period 1,473 1,552 4,831
Currency translation differences on foreign currency net (50) 16 (9)
investments
TOTAL RECOGNISED GAINS IN THE YEAR 1,423 1,568 4,822
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30.09.06 30.09.05 31.03.06
Restated Restated
£'000 £'000 £'000
Profit for the period 1,473 1,552 4,831
Issue of new shares net of costs 60 12 34
Finance costs on preference shares 2 2 4
Currency translation differences on foreign currency net (50) 16 (9)
investments
Reclassification of preference dividend reserve as a liability - (638) (638)
FRS20 share based payment credit to reserves 51 41 82
Ordinary dividend proposed and paid (490) - -
Net increase to shareholders' funds 1,046 985 4,304
Opening shareholders' funds 13,452 9,148 9,148
CLOSING SHAREHOLDERS' FUNDS 14,498 10,133 13,452
NOTES
1. ACCOUNTING POLICIES
The interim results 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
FRS20 'Share based payments' this year. The company has applied the
requirements of FRS20 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 Option Pricing 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
behavioral considerations.
2. TAXATION
The corporation tax charge for the period is based on the effective rate which
it is estimated will apply for the full year.
3. COMPARATIVE FIGURES
The comparative figures for the year ended 31 March 2006, which do not
constitute statutory accounts, are abridged from the company's statutory
accounts which have been filed with the Registrar of Companies, as restated for
the effect of the adoption of FRS20 in the period. The report of the auditors,
Deloitte & Touche LLP, on these accounts was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
4. APPROVAL AND DISTRIBUTION
This report was approved by the Board of Directors on 6 December 2006 and is
being sent to all shareholders. Additional copies are available from the Company
Secretary at the Registered Office The Rookery, Chilcompton, Somerset BA3 4EH.
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Friday, 10th January 2025
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