TIDMBRBY
RNS Number : 0549F
Burberry Group PLC
12 November 2020
12 November 2020
Burberry Group plc
Interim results for 26 weeks ended 26 September 2020
Strategic progress driving good recovery
"Though the momentum we had built was disrupted by COVID-19 at
the start of the year, we were quick to adapt, while making further
progress against our strategy. While the virus continues to impact
sales in EMEIA, Japan and South Asia Pacific, we are encouraged by
our overall recovery and the strong response to our brand and
product, particularly among new and younger customers. In an
environment which remains uncertain, we will continue to deliver
exceptional product, localise plans and shift resources, while
leveraging the strength of our digital platform to inspire
customers." - Marco Gobbetti, Chief Executive Officer
-- H1 FY2021 saw a 31% revenue fall with adjusted operating
profit down 75% and adjusted diluted EPS down 88% (reported diluted
EPS down 66%).
-- Recovery underway with sequential improvement in comparable
store sales to -6% in Q2 FY2021 from -45% in Q1 FY2021 and
returning to growth in October
-- Q2 FY2021 saw strong double digit growth in Mainland China,
Korea and the U.S.; EMEIA, Japan and South Asia Pacific remain
impacted by the significant reduction in tourism.
-- Good strategic progress despite COVID, especially in four areas:
o Strong response to product with marked increase in the weight
of full-price channels YoY
o Growth in leather goods - outperforming the average retail
comp
o Excellent growth on digital, up high double digits
o Good brand traction as we attract new and younger
customers
-- Performance underpinned by rigorous management of cost and
cash with long term financing in place with the issue of a
sustainability bond
Period ended 26 Sept 28 Sept % change
GBP million 2020 2019 Reported CER*
FX
------------------------------- -------- -------- ----------- ----------
Revenue 878 1,281 (31) (30)
Retail comparable store
sales* (25%) 4%
Adjusted operating profit* 51 203 (75) (71)
Adjusted operating profit
margin 5.8% 15.9% (10.1%pts) (9.3%pts)
Reported operating profit 88 202 (56)
Adjusted Diluted EPS (pence)* 4.6 36.9 (88)
Diluted EPS (pence) 12.2 36.4 (66)
Free cash flow* (45) (29)
Dividend (pence) 0.0 11.3
------------------------------- -------- -------- ----------- ----------
*See page 14 for definitions of alternative performance
measures
Outlook FY2021
We are encouraged by the recovery in Q2 FY2021 but remain
conscious of the uncertain macro-economic environment caused by
COVID-19. We currently have more than 10% of our stores closed
globally following the recent lockdowns in EMEIA. With the brand
resonating and attracting new and younger consumers, we have taken
the decision to reduce markdowns and this will be a revenue
headwind in H2 FY2021 with the main impact in Q3 FY2021 but will
serve the long term interest of the brand. We are well positioned
to continue to drive performance and deliver growth in the medium
term.
The financial information contained herein is unaudited.
All metrics and commentary in the Interim Review exclude
adjusting items unless stated otherwise.
Constant exchange rates (CER) removes the effect of changes in
exchange rates compared to the prior period. This takes into
account both the impact of the movement in exchange rates on the
translation of overseas subsidiaries' results and also on foreign
currency procurement and sales through the Group's UK supply
chain.
The following alternative performance measures are presented in
this announcement: adjusted profit measures, comparable sales, free
cash flow, adjusted EBITDA and net debt. The definitions of these
alternative performance measures are set out in the Appendix on
page 14.
Cumulative cost savings are savings compared to FY 2016
operating expenses. The savings relating to the store
rationalisation programme are measured compared to the reported
costs which were under IAS 17.
Certain financial data within this announcement have been
rounded.
Enquiries
Investors and analysts 020 3367 4458
Julian Easthope VP, Investor Relations julian.easthope@burberry.com
Media 020 3367 3764
Andrew Roberts VP, Corporate Relations andrew.roberts@burberry.com
-- There will be a live webcast presentation today at 9.30am (UK
time) for investors and analysts
-- The presentation can be viewed live on the Burberry website www.burberryplc.com
-- The supporting slides and an indexed replay will be available
on the website later in the day
-- Burberry will update on third quarter trading on 20 January 2021
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. Burberry Group plc
undertakes no obligation to update these forward-looking statements
and will not publicly release any revisions it may make to these
forward-looking statements that may result from events or
circumstances arising after the date of this document. Nothing in
this announcement should be construed as a profit forecast. All
persons, wherever located, should consult any additional
disclosures that Burberry Group plc may make in any regulatory
announcements or documents which it publishes. All persons,
wherever located, should take note of these disclosures. This
announcement does not constitute an invitation to underwrite,
subscribe for or otherwise acquire or dispose of any Burberry Group
plc shares, in the UK, or in the US, or under the US Securities Act
1933 or in any other jurisdiction.
Burberry is listed on the London Stock Exchange (BRBY.L) and is
a constituent of the FTSE 100 index. ADR symbol OTC:BURBY.
BURBERRY, the Equestrian Knight Device, the Burberry Check, and
the Thomas Burberry Monogram and Print are trademarks belonging to
Burberry.
www.burberryplc.com
Twitter: @BurberryCorp
LinkedIn: Burberry
GROUP H1 FY2021 FINANCIAL HIGHLIGHTS
-- Revenue GBP878m -30% CER, -31% reported
-- Retail comparable store sales -25% (Q1: -45%; Q2: -6%) with
good recovery as the half progressed.
Adjusted operating profit:
-- Adjusted operating profit GBP51m, -71% CER.
-- Gross margin was up 90bps at CER, partly offset by currency
resulting in +60bps at reported rates, benefiting from geographical
and full price channel mix and reduced charges for inventory
provisioning.
-- Operating expenses at reported rates fell 17% following cost savings.
-- Adjusted diluted EPS 4.6p, 88% decline.
Reported profit measures:
-- Reported operating profit GBP88m, -56% after adjusting items
of GBP37m credit (H1 FY2020: GBP1m charge).
-- Diluted EPS 12.2p, -66% reported.
Cash measures:
-- Free cash outflow of GBP45m (H1 FY2020: GBP29m outflow).
After an outflow of cash in April when 60% of stores were closed,
we stabilised in May and were free cash flow positive from August.
The H1 FY2021 outflow reflects trading and is in line with normal
seasonality which includes the festive season inventory build.
-- Cash net of overdrafts and borrowing of GBP542m at 26
September 2020 (28 March 2020: GBP587m). Cash net of overdrafts
amounted to GBP1,138m with borrowings of GBP596m (with GBP297m from
the bond and GBP299m from the CCFF). The GBP300m RCF is currently
undrawn.
-- No interim dividend declared (H1 FY2020: 11.3p) - as guided at the FY2020 results.
Summary income statement
Period ended 26 Sept 28 Sept % change % change
GBP million 2020 2019 Reported CER
FX
--------
Revenue 878 1,281 (31) (30)
Cost of sales* (280) (416)
------------------------- -------- -------- ----------- ----------
Gross profit* 598 865 (31)
Gross margin %* 68.1% 67.5% +60bps
Operating expenses* (547) (662) (17)
Opex as a % of sales* 62.3% 51.6%
------------------------- -------- -------- ----------- ----------
Adjusted operating
profit* 51 203 (75) (71)
Adjusted operating
margin %* 5.8% 15.9% (10.1%pts) (9.3%pts)
Adjusting operating
items 37 (1)
------------------------- -------- -------- ----------- ----------
Operating profit 88 202 (56)
Net finance (charge)
() (15) (9)
------------------------- -------- -------- ----------- ----------
Profit before taxation 73 193 (62)
Taxation (25) (43)
Attributable profit 48 150
Adjusted profit before
taxation* 36 195 (82) (77)
Diluted adjusted EPS
(pence)* 4.6 36.9 (88) (85)
EPS (pence) 12.2 36.4 (66)
Weighted average number
of diluted ordinary
shares (millions) 404.7 412.5
------------------------- -------- -------- ----------- ----------
* Excludes adjusting items. Includes adjusting finance charge of nil (H1 FY2020: GBP1m).
BUSINESS AND FINANCIAL REVIEW
Over the last two years we transitioned the brand and product
and pre-COVID-19 were seeing increased momentum. In January, ahead
of the outbreak, we delivered double digit comparable store sales
growth. FY2021 commenced with 60% of stores closed globally due to
COVID-19, which led to a material impact on trading in Q1 FY2021
and comparable store sales down -45%. We adapted rapidly as stores
reopened and saw a strong recovery resulting in a -6% comp in Q2,
led by full-price channels. The recovery has further accelerated in
the last two months, with comparable store sales in September down
low single digit and positive in October.
With restricted travel and evolving consumption patterns, we
have reoriented our business to capture opportunities in rebounding
markets, localising plans and shifting resources where needed. This
has resulted in higher exit rates in September compared with June
and strong performance in Americas and Asia. In Americas,
comparable store sales were +21% in Q2 FY2021, with the US higher
than the regional average, driven by momentum with new and younger
customers and full price channels outperforming. In Asia,
comparable store sales were +10%, with strong growth in Mainland
China and Korea more than offsetting the performance of other Asian
markets including Hong Kong SAR and Australia. In Mainland China,
we have seen a positive reaction to localised campaigns and strong
response to our core product categories - leather goods, in
particular Pocket, and outerwear, which experienced high double
digit growth in Q2 FY2021. Mainland China has enjoyed good double
digit sales growth in full price channels since May.
Given the importance of digital in the current environment, we
have also leveraged our strength in this area resulting in high
double digit growth in Q2 FY2021. The channel has been particularly
important in supporting regions with second waves of COVID-19. In
these regions, digital sales significantly grew as the stores saw
temporary closures. We have driven this acceleration through
immersive experiences on .com, such as our BSurf game accompanying
the Summer Monogram capsule and online world, a series of digital
pop-ups dedicated to leather goods, and exceptional-visibility
activations on third party platforms. In September, we participated
in Tmall's SuperBrand Day, driving the highest single-day sales to
date on Tmall.
Success continues to depend on leveraging digital to also bridge
online and offline, as well as driving traction with local
customers. In Mainland China, where we have seen significant
digital adoption, we opened our first social retail store in
Shenzhen Bay in an exclusive partnership with Tencent. Since its
launch in July, it is outperforming our expectations and attracting
new and younger consumers to the brand. Globally, we have focused
on mitigating the impact of reduced traffic and tourist spend in
stores. For instance, we have been amplifying our appointments
strategy, launching new, locally relevant formats (e.g., at-home
appointments, virtual appointments, styling events) that deliver a
luxury shopping experience and ensure our clients feel safe. We
have also introduced new online-to-offline customer journeys,
linking consumers browsing on .com directly to sales associates in
stores.
Throughout COVID -19, the customer response to our brand and
product has remained strong. We continued to innovate and deliver
inspiration to engage customers and drive revenue in this
environment. For instance, to celebrate our Summer Monogram
capsule, we launched our first computer-generated campaign,
featuring self-portraits captured at home by Kendall Jenner, which
had a great response from press and consumers. In just two days, we
saw double digit growth in pieces of coverage and met our ambitious
sales targets for the launch. In addition, challenged with how we
present our new runway collection, we hosted our Show open to all
to experience digitally on Twitch - making us the first luxury
brand to partner the live-streaming video platform. To date, with
118m views across all platforms, it has become our most viewed show
on record. These activations have attracted new and younger
customers to the brand, driving a considerably higher share of
sales from these clients in Q2 FY2021 than Q1 FY2021.
In terms of product, our collections continue to resonate with
consumers. This has supported a noticeable increase in the weight
of full price sales. In addition, we have started to see
considerable traction in leather goods, outperforming overall
retail comparable sales growth performance single digit growth in
Q2 FY2021. The bags family architecture we established - Lola, TB,
Pocket and Title - now account for the majority of full price sales
in bags, supported by a series of over 40 leather goods activations
and pop-ups we have launched in the first half of this year.
Finally, as part of AW20 we launched the Olympia bag that has seen
a strong initial momentum.
Our H1 FY2021 performance has been underpinned by strong cash
and cost discipline. We ended the period with GBP542m of cash net
of overdrafts and borrowings and cash net of overdrafts of
GBP1,138m. As at 26 September 2020, the 12 month adjusted Net Debt
/ adjusted EBITDA ratio was 0.9x, and remained inside our target
range of 0.5x to 1.0x despite the impact of the pandemic. To
diversify our borrowings into longer term financing, we issued our
sector's first sustainability bond that raised GBP297m, net of
costs, following the receipt of a Baa2 rating (stable outlook) from
Moody's. Cost savings have also progressed well. We now expect the
original cost reduction programme to bring cumulative savings of
GBP148m by the end of FY2021 up from the GBP140m target reported at
the FY2020 results. This increase leads to a GBP23m cost reduction
in FY2021 compared with our original guidance of GBP15m. We are
also on track to achieve the annualised GBP55m of cost savings from
the rationalisation programme announced at Q1 FY2021 and plan to
reinvest this into customer facing activities.
ESG:
We are committed to having a positive impact on people and the
planet and during the half, we continued to make progress against
our social and environmental agenda. In addition to linking the
bond proceeds to our sustainability goals, we took measures to
further reduce our environmental footprint. Our retail operations
in Mainland China, Hong Kong SAR, Macau SAR, Malaysia, Singapore
and Thailand are now carbon neutral and source 100% renewable
electricity. We also further supported the decarbonisation of our
supply chain, helping our Italian suppliers in their transition to
renewable energy. At the same time, we introduced a global D&I
policy to ensure we attract and retain a diverse workforce wherever
we operate. We reinforced our commitment to the LGBTQ+ community,
becoming the first luxury company to join the Stonewall Diversity
Champions Programme. We also strengthened our community support by
expanding our creative arts scholarships for underrepresented
students to world renowned institutions in London, New York and
Paris, while the Burberry Foundation widened its in-school arts and
culture programme Burberry Inspire' to the US.
Brexit mitigation:
We continue to implement plans to mitigate the impact of the
UK's withdrawal from the EU. Post transition, we will face
operational challenges associated with cross border movement of
goods and potentially incremental duty costs. Our plans cover the
short term impact of managing the new Customs border and extend to
strategic options to reconfigure elements of our supply chain as
required, particularly if there is no prospect of a zero tariff
Free Trade Agreement.
First half financial performance
-- FY2021 commenced with 60% of stores closed globally due to
COVID-19 with most reopening by the end of June. This had a very
material impact on trading in Q1 FY2021 that saw comparable store
sales fall 45% but we have been pleased by the recovery in Q2
FY2021 at --6%. Trading patterns have been affected by tourism
flows globally with tourists accounting for just 4% of full price
channel sales in the period down from 28% in H1 FY2020. The exit
rate for overall comparable store sales improved with September
down by a low single digit percentage and October turning positive.
Overall the 29% decline in retail sales and 38% reduction in
wholesale revenue led to a 30% decline in CER revenue and 31%
reported revenue decline in H1 FY2021 to GBP878m (H1 FY2020
GBP1,281m).
-- Group adjusted operating profit declined 71% in the half at
CER. Gross margin increased in the period by 90bps CER and 60bp
reported due to Asian and retail sales mix and reduced charges for
inventory provisioning. Operating expenses were strictly controlled
and fell by 17%. This excludes GBP26m of cash rent concessions
negotiated during the crisis as well as stock, store and receivable
impairment reversals that we have treated as an adjusting item.
Reported operating profit declined 56% including GBP37m of
adjusting items credits. FX was an GBP8m headwind in H1.
-- There was a GBP45m free cash outflow (H1 FY2020 GBP29m
outflow) in the half caused by the trading environment. Working
capital absorbed GBP90m of cash (H1 FY2020 GBP120m) with inventory
increasing GBP34m (H1 FY2020 GBP51m) in line with normal patterns
ahead of the festive season. Capital expenditure amounted to GBP46m
(H1 FY2020 GBP68m).
Revenue analysis
Revenue by channel
Period ended 26 Sept 28 Sept % change
GBP million 2020 2019 Reported CER
FX
------------------------------ ----------- ----------- --------- -----
Retail 704 1,004 (30) (29)
Retail comparable store
sales growth (25%) 4%
Wholesale 156 253 (38) (38)
Licensing 18 24 (24) (24)
----------- ----------- --------- -----
Revenue 878 1,281 (31) (30)
------------------------------ ----------- ----------- --------- -----
Retail
-- Retail sales -29% at CER; -30% reported.
-- Impact of space -4%.
H1 FY2021 comparable store sales -25% (Q1 FY2021: -45%; Q2
FY2021: -6%).
Revenue comparable store sales commentary by region
Asia Pacific Flat (Q1 FY2021: -10%; Q2 FY2021: +10%)
-- Asia Pacific saw the best regional performance in H1 FY2021
due to strong performance in Mainland China and Korea.
-- Mainland China saw improved momentum in the period with Q2
comparable store sales increasing ahead of the June exit rate
boosted by some repatriation of spend.
-- Korea also remained strong despite the short term impact of the second wave.
-- South Asia Pacific (SAP) fell materially, affected by trading
in Hong Kong SAR and further store closures during the second wave
in Australia.
-- Japan also fell, impacted by softness in tourist arrivals and
annualisation of last year's consumption tax increase.
EMEIA -56% (Q1 FY2021: -74%; Q2 FY2021: -39%)
-- EMEIA was especially impacted by travel trends with more than
50% of sales typically from tourists in the first half in previous
years.
-- Continental Europe saw a decline broadly in line with the
regional average but encouragingly local spend increased in Q2
FY2021.
-- Middle East performed better than the average and recovered
well with Q2 FY2021 down mid-single digit and local spend up
strongly.
-- UK remained difficult with tourist demand weak given the high
London exposure. Local demand increased in Q2 FY2021.
Americas -28% (Q1 FY2021: -70%; Q2 FY2021: +21%)
-- Americas saw the biggest recovery between quarters as the stores reopened
-- Q2 FY2021 enjoyed good growth, driven by sales to locals and
strong digital performance. Within this, the US outperformed in the
region.
Digital performed well in the period with double digit growth in
H1 FY2021 and strong double digit in Q2 FY2021 across all regions.
It performed particularly well in the Americas where growth in Q2
FY2021 was well into triple digits.
By product
-- All product categories were impacted by the store closures in
Q1 FY2021 but saw improvement in Q2 FY2021. The key Q2 highlights
included:
-- Leather goods increased low single digits in Q2 FY2021 with
our four bag pillars accounting for over 60% of women's bag
sales.
-- Menswear performed well in Q2 FY2021 due to good traction in
jersey wear and trousers. Womenswear also saw a good performance in
dresses and knitwear. Across ready-to-wear our house codes continue
to resonate strongly and outperformed in the period.
-- Outerwear was impacted by lockdown and working from home.
However, we saw high double digit growth in Mainland China in Q2
FY2021 following a successful localised Trench campaign featuring
Zhou Dongyu generating nearly 100m impressions and circa 4m
interactions across social media channels.
Store footprint
The transformation of our distribution continued as we addressed
high priority programmes:
-- In H1 FY2021 we opened 12 stores and closed 12 stores.
-- Key openings included 9 in Mainland China including our first Social Retail store in Shenzhen
-- Cumulative 29 stores closed to date of the 38 planned
closures from the non-strategic store rationalisation
programme.
-- A cumulative 83 stores are now new or refurbished and aligned
to our new creative vision, an increase of 19 in H1 FY2021.
Wholesale
Wholesale revenue declined 38% at CER as we reduced inventory in
the system to actively limit excess stock and third party
discounting.
This was a little ahead of our original guidance due to the
timing of shipments.
All regions saw large double digit percentage declines with Asia
Pacific seeing the greatest fall given to the impact from travel
retail.
Licensing
Licensing revenue fell 24% due to lower sales from the COVID-19
fallout.
Operating profit analysis
Adjusted operating profit
Period ended 26 Sept 28 Sept % change
2020 2019
GBP million
--------
Reported CER
FX
-------- -------- ----------- ----------
Revenue 878 1,281 (31%) (30%)
Cost of sales* (280) (416)
Gross profit 598 865 (31%)
Gross margin % 68.1% 67.5% +60bps
Operating expenses* (547) (662) (17%)
Opex as a % of sales 62.3% 51.6%
---------------------- -------- -------- ----------- ----------
Adjusted operating
profit 51 203 (75%) (71%)
Adjusted operating
margin % 5.8% 15.9% (10.1%pts) (9.3%pts)
---------------------- -------- -------- ----------- ----------
*excludes adjusted items
Adjusted operating profit declined 71% and margin decreased by
9.3%pts at CER.
-- Gross margin increased 90bps at CER and 60bps reported. This
benefited from higher margin Asian revenues as a proportion of the
mix, the higher percentage of retail over wholesale and reduced
charges for inventory provisioning.
-- Adjusted operating expenses fell by 17% against last year, in
line with our guidance of a mid-teens percentage reduction. This
benefited from lower store depreciation following the FY2020
impairment charge, the cost reduction programme, non-strategic
store closures as well as a number of other more temporary
savings.
Adjusted operating profit amounted to GBP51m including an GBP8m
FX headwind in H1 FY2021.
Adjusting items(*)
Adjusting items were a credit of GBP37m (H1 FY2020: GBP2m
charge).
Adjusting items* 26 Sept 28 Sept
Period ended 2020 2019
GBP million
--------
The impact of COVID-19
Inventory provisions 7 -
Rent concessions 26 -
Store impairments 23 -
Receivable impairments 2 -
-------- --------
COVID-19 adjusting items 58 -
Restructuring costs (22) (1)
BME deferred consideration income 1 -
Adjusting operating items 37 (1)
Adjusting financing items - (1)
Adjusting items 37 (2)
----------------------------------- --------
The major adjusting items are as follows:
-- Impact of the COVID-19 pandemic: around half of the adjusting
items relate to rent concessions across our retail network with the
remainder relating to impairment reversals to the carrying value of
inventory, stores and receivables due to the positive reassessment
of underlying assumptions.
-- Restructuring costs: GBP18m related to the organisational
changes announced in July 2020 and GBP4m to the cost-efficiency
programme announced in 2017 that is due to end this year.
-- Burberry Middle East deferred consideration income: the GBP1m
income reflects the revaluation of the deferred consideration
balance.
-- Adjusting finance charge: the GBP1m prior year charge relates
to the deferred consideration that arose from the Burberry Middle
East and Burberry Manifattura transactions.
Adjusted profit*
After a net finance charge of GBP15m (H1 FY2020 GBP9m), adjusted
profit before tax was GBP36m (H1 FY2020 GBP195m).
*For detail on adjusting items see note 4 of Condensed
Consolidated Interim Financial Statements
Taxation
The effective tax rate on H1 FY2021 adjusted profit was 50.9%
(H1 FY2020: 22.0%, FY2020: 22.3%). This was higher than normal due
to the geographical mix of profits and the impact of prior year
adjustments on a relatively low profit base. The effective tax rate
on H1 FY2021 reported profit before taxation was 33.6% (H1 FY2020:
22.1%, FY 2020: 27.9%), due to the impact of the lower tax rate on
adjusting items.
The effective tax rate on adjusted profit for FY2021 is
estimated to be around 30% (FY 2020: 22.3%) due to the geographical
mix of the profits and the impact of adjustments in respect of
prior years.
Cash flow
Free cash outflow* was GBP45m in the half (H1 FY2020 outflow of
GBP29m). During the period we saw a significant outflow in April,
stabilising in May and turning cash positive from August.
The major components were:
-- Cash from operations fell from GBP261m to GBP86m
o A working capital outflow of GBP90m (H1 FY2020: GBP120m) due
to normal seasonal patterns.
o Depreciation and amortisation fell GBP31m including GBP24m
attributed to lower depreciation on right of use asset reflecting
the impairments recorded at March FY2020.
-- Capital expenditure of GBP46m (H1 FY2020: GBP68m) as we
prioritised targeted capex projects and retained flexibility in the
current trading environment.
Cash net of overdrafts at 26 September 2020 was GBP1,138m,
compared to GBP670m at 28 September 2019 and GBP887m at 28 March
2020. At 26 September 2020 borrowings were GBP299m from the CCFF
and GBP297m from the bond issue leaving cash net of overdrafts and
borrowings of GBP542m (28 March 2020: GBP587m). We repaid the RCF
in June and this remains committed. Our net debt(*) including
reported lease liabilities was GBP550m (28 March 2020: GBP538m).
Net Debt / adjusted EBITDA was 0.9x on a rolling 12 months period,
remaining within our target range of 0.5x to 1.0x.
*For a definition of free cash flow and net debt see page
15.
Period ended 26 Sept 28 March
GBP million 2020 2020
Adjusted EBITDA - rolling
12 months 581 764
Cash net of overdrafts (1,138) (887)
RCF drawn - 300
CCFF drawn 299 -
Bond 297 -
Lease debt 1,092 1,125
-------- ---------
Net Debt 550 538
Net Debt/Adjusted EBITDA 0.9x 0.7x
-------- ---------
Financial outlook
-- While we are encouraged by the revenue performance in
October, trading is expected to be impacted by the recently
announced lockdowns in Europe. Currently more than 10% of our
stores are closed due to COVID-19 restrictions.
-- With the brand resonating and attracting new and younger
consumers, we have taken the decision to reduce markdowns and this
will be a revenue headwind in H2 FY2021 mainly in Q3 FY2021 but
will serve the long term interest of the brand.
-- We expect space growth to be +3% in H2 FY2021.
-- The full year tax rate is expected to be around 30%.
-- Dividends will be reviewed at the end of FY2021.
-- At 30 October spot rates, the impact of year-on-year exchange
rate movements is expected to be a benefit of GBP5m on adjusted
operating profit and a benefit of GBP16m on revenue for the full
year.
APPIX
Detailed guidance for FY2021*
Item Financial impact
Markdown policy We plan to materially reduce markdowns in H2
FY2021 with the main impact being in Q3 FY2021
-----------------------------------------------------
Impact of retail We expect space to increase by 3% in H2 FY2021
space on revenues
-----------------------------------------------------
Cost savings** Opex will benefit from cumulative cost savings
of GBP148m, an incremental GBP23m in the year,
GBP10m from the store closures (adjusted operating
profit neutral),
-----------------------------------------------------
Tax We expect the adjusted tax rate to be around
30%
-----------------------------------------------------
Currency At 30 October spot rates, the impact of year-on-year
exchange rate movements is expected to be a
GBP5m benefit on adjusted operating profit and
a GBP16m benefit to revenue in FY2021
-----------------------------------------------------
Restructuring costs GBP40m from the restructuring announced in Q1
and GBP7m from the Operational Efficiency programme
-----------------------------------------------------
*Guidance assumes constant exchange rates, a stable economic
environment and current tax legislation. It excludes the impact of
the UK's possible withdrawal from the EU without an agreement. In
the event of the UK withdrawing from the European Union without an
agreement, there is likely to be a material but manageable
operational and financial impact on Burberry's business. We
continue to prepare mitigating actions to limit the operational and
financial impact in the short term.
**The base year for the cumulative cost savings is 2016
Exchange rates
Forecast effective rates for FY2021 Actual average exchange rates
30 October 27 June 2020 H1 FY2021 H1 FY2020 FY2020
GBP1= 2020
------------------ ----------- ------------- ------------ ----------- -------
Euro 1.11 1.11 1.12 1.12 1.14
US Dollar 1.27 1.24 1.26 1.26 1.27
Chinese Renminbi 8.76 8.79 8.87 8.71 8.88
Hong Kong Dollar 9.88 9.62 9.79 9.82 9.89
Korean Won 1,492 1,498 1,525 1,486 1,504
------------------ ----------- ------------- ------------ ----------- -------
Retail/wholesale revenue by destination
Period ended 26 Sept 28 Sept % change
GBP million 2020 2019 Reported FX CER
------------------- ----------- ----------- ------------ -----
Asia Pacific 439 500 (12) (11)
EMEIA 251 487 (49) (48)
Americas 170 270 (37) (35)
Total 860 1,257 (32) (31)
------------------- ----------- ----------- ------------
Retail/wholesale revenue by product division
Period ended 26 Sept 28 Sept % change
GBP million 2020 2019 Reported FX CER
-------------------------- ---------- ---------- ------------- -----
Accessories 301 457 (34) (33)
Women's 242 387 (38) (37)
Men's 258 347 (26) (25)
Children's & other 59 66 (10) (8)
Total 860 1,257 (32) (31)
-------------------------- ---------- ---------- -------------
Store portfolio
Directly-operated stores
--------------------------------------- ----------
Stores Concessions Outlets Total Franchise
stores
------------------- ------- ------------ -------- ----------
At 28 March 2020 218 149 54 421 44
Additions 9 - 3 12 1
Closures (9) (1) (2) (12) (1)
At 26 September
2020 218 148 55 421 44
------- ------------ --------
Store portfolio by region
Directly-operated stores
--------------------------------------- ----------
Stores Concessions Outlets Total Franchise
At 26 September stores
2020
------------------- ------- ------------ -------- ----------
Asia Pacific 97 89 20 206 7
EMEIA 57 50 18 125 37
Americas 64 9 17 90 -
Total 218 148 55 421 44
------- ------------ --------
Adjusted operating
profit*
Period ended % change
26 Sept 28 Sept Reported % change
GBP million 2020 2019 FX CER
-------- --------
Retail/wholesale 34 182 (81) (77)
Licensing 17 21 (22) (22)
-------------------- -------- -------- ------------ ---------
Adjusted operating
profit 51 203 (75) (71)
Adjusted operating (9.3%
margin 5.8% 15.9% (10.1% pts) pts)
-------------------- -------- -------- ------------ ---------
*For additional detail on adjusting items see note 4 of
Condensed Consolidated Interim Financial Statements
Profit before tax reconciliation
Period ended 28 Sept 28 Sept % change % change
2020 2019 Reported CER
GBP million FX
-------------------------- -------- -------- ---------- ---------
Adjusted profit before
tax 36 195 (82) (77)
Adjusting items*
Impact of COVID-19 58 -
Restructuring costs (22) (1)
Revaluation of deferred 1 -
consideration liability
Adjusting financing
items - (1)
-------------------------- -------- -------- ---------- ---------
Profit before tax 73 193 (62)
-------------------------- -------- -------- ---------- ---------
Alternative performance measures
Alternative performance measures (APMs) are non-GAAP measures.
The Board uses the following APMs to describe the Group's financial
performance and for internal budgeting, performance monitoring,
management remuneration target setting and for external reporting
purposes.
APM Description and purpose GAAP measure reconciled to
Constant This measure removes the Results at reported rates
Exchange effect of changes in exchange
Rates (CER) rates compared to the
prior period. It incorporates
both the impact of the
movement in exchange rates
on the translation of
overseas subsidiaries'
results and also on foreign
currency procurement and
sales through the Group's
UK supply chain.
------------------------------- ----------------------------------------
Comparable The year-on-year change Retail Revenue:
sales in sales from stores trading Period ended 26 Sept 28 Sept
over equivalent time periods YoY% 2020 2019
and measured at constant ------------------ -------- --------
foreign exchange rates. Comparable sales -25% 4%
It also includes online Change in space -4% -
sales. This measure is FX -1% 2%
used to strip out the ------------------ -------- --------
impact of permanent store Retail revenue -30% 6%
openings and closings,
or those closures relating
to refurbishments, allowing
a comparison of equivalent
store performance against
the prior period. The
measurement of comparable
sales has not excluded
stores temporarily closed
as a result of the COVID-19
outbreak.
------------------------------- ----------------------------------------
Adjusted Adjusted profit measures Reported Profit:
Profit are presented to provide A reconciliation of reported profit
additional consideration before tax to adjusted profit
of the underlying performance before tax is included in the
of the Group's ongoing income statement on page 18. The
business. These measures Group's accounting policy for
remove the impact of those adjusted profit before taxation
items which should be is set out in note 2 to the condensed
excluded to provide a consolidated interim financial
consistent and comparable statements.
view of performance .
------------------------------- ----------------------------------------
Free Cash Free cash flow is defined Net cash generated from operating
Flow as net cash generated activities:
from operating activities Period ended 26 Sept 28 Sept
less capital expenditure GBPm 2020 2019
plus cash inflows from -------------------- -------- --------
disposal of fixed assets Net cash generated
and including cash outflows from operating
for lease principal payments activities 63 164
and other lease related Capex (46) (68)
items. Payment of
lease principal (62) (115)
Other lease
related items - (10)
Free cash flow (45) (29)
Net Debt Net debt is defined as Cash net of overdrafts:
the lease liability recognised Period ended 26 Sept 28 Mar
on the balance sheet plus GBPm 2020 2020
borrowings less cash net ------------------------ -------- --------
of overdrafts. Cash net of overdrafts 1,138 887
Lease liability (1,092) (1,125)
Borrowings (596) (300)
------------------------ -------- --------
Net debt (550) (538)
----------------------------------- ----------------------------------------------
Adjusted Adjusted EBITDA is defined Reconciliation from operating
EBITDA as operating profit, excluding profit to adjusted EBITDA:
adjusting operating items, Period ended 26 Sept 28 Sept
depreciation of property, GBPm 2020 2019
plant and equipment, depreciation ---------------------- -------- --------
of right of use assets Operating profit 88 202
and amortisation of intangible Adjusted operating
assets. Any depreciation items (37) 1
or amortisation included Amortisation
in adjusting operating of intangible
items are not double-counted. assets 15 12
Depreciation
of property,
plant and equipment 31 40
Depreciation
of right-of-use
assets 83 108
---------------------- -------- --------
Adjusted EBITDA 180 363
----------------------------------- ----------------------------------------------
-- Pro forma results were presented during FY2020, to provide a
year on year comparative as IFRS 16 Leases was adopted without
restating the prior period. This is no longer relevant, since all
periods presented apply IFRS 16.
Related parties
Related party disclosures are given in note 20 of the Condensed
Consolidated Interim Financial Statements.
Principal Risks
As at FY2020 year-end many of the Group's risks were elevated as
we navigated the outbreak of the COVID-19 crisis. During H1 FY2021
the pandemic crisis has continued to present challenges to global
health and macro-economic conditions.
As at H1 FY2021, there are increased uncertainties as to the
impact on our industry, particularly regarding the timing of an
effective vaccine and when an economic rebound might occur.
We now see a higher likelihood of a significant impact
materialising from the Group's principal risks of macroeconomic
uncertainty and civil unrest, global Chinese consumer spending and
image and reputation.
The principal risks and uncertainties that the Group faces for
the remaining 26 weeks of the financial year are consistent with
those previously reported and are summarised below:
External Risks
-- Macro- Economic Uncertainty and Civil Unrest: The Group
operates in a wide range of markets and is exposed to changing
economic, regulatory, social and political developments that may
impact consumer demand, disrupt operations and impact
profitability. Adverse macro-economic conditions or
country-specific civil unrest for example in Hong Kong, may impact
spending habits of key consumer groups such as the Chinese consumer
and cause increased operational costs. Any deterioration in
diplomatic relations between China and the UK may impact the
operating environment and consumer spending as well as the overall
trading performance of the Group in certain markets.
-- COVID-19 Further Impact: The impact of the COVID-19 pandemic
on the global economy and the operating activities of many
businesses has resulted in a climate of considerable economic
uncertainty. The continuing spread of COVID-19 and the associated
restrictions on public life are expected to continue to
significantly impact the Group's trading performance.
-- UK's withdrawal from the EU: Increased uncertainty regarding
the trading relationship between the UK and the EU following the
end of the transition period may negatively impact the overall
financial and operating performance of the Group. As previously
stated, we have prepared for a no deal outcome and have plans in
place to limit the impact on business operations and incremental
costs, including additional duties.
Strategic and Financial Risks
-- Execution of Strategy: The Group's success depends on the
value and relevance of our brand to luxury consumers around the
world and the Group's ability to innovate to enhance brand value.
Inability to execute the projects that underpin our brand strategy
successfully could result in under delivery on the expected growth,
productivity and efficiency targets. This could have a significant
impact on the value of the Group's business and market
confidence.
-- Image and Reputation: Unfavourable incidents, unethical
behaviour or erroneous media coverage relating to the Group's
executives, products, practices or supply chain operations could
damage the Group's reputation. Failure to understand social issues
and respect cultural sensitivities around product and marketing
content could negatively impact Burberry's reputation.
-- Global Chinese Consumer Spending: Any significant change to
Chinese consumer spending habits or the economic, regulatory,
social and/or political environment in China, including a further
global health emergency or a natural disaster, may adversely impact
the consumer group's disposable income or confidence. The Group may
also be adversely impacted by restrictions imposed on international
travel.
-- Volatility in foreign exchange rates: The Group operates
internationally and is exposed to uncertainty through foreign
exchange movements, which could have a significant impact on the
Group's reported results.
Operational Risks
-- Loss of Data or Cyberattack: By handling large amounts of
customer data, the Group is exposed to potential data breaches,
whether unintentional or by cyberattack, and the resulting
penalties under data protection laws. If the Group suffered a
cyberattack which resulted in a system outage, this could have a
major impact on core operations or major data loss, as well as
leading to reputational damage and financial loss.
-- People: Inability to safeguard, retain, attract, motivate and
develop our people to perform to the best of their ability in order
to meet the Group's strategic objectives. Failure to attract and
retain talented people may lead to sub-optimal operational
performance.
-- IT Operations: The IT function supports critical processes
across the Group including retail, digital and Group functions such
as Supply Chain and Finance. Failure to provide technology
platforms that meet customer demands and support innovation could
result in failure to deliver the strategy and negatively impact
operations due to poor system performance and/or system
outages.
-- Climate Change: The success of the Group's business over the
long term will depend on the social and environmental
sustainability of our operations, the resilience of our supply
chain and our ability to manage the impact of any potential climate
change on our business model and performance.
-- Business Interruption: Major incidents in locations where the
Group or its suppliers operate may significantly interrupt the
business. Such incidents could be caused by a wide range of events
at country level, including natural catastrophes, health
emergencies or changes in regulations, and localised incidents such
as fire, terrorism, or quality control failures.
Compliance Risks
-- Regulatory Risk and Ethical/Environmental Standards: The
Group's operations are subject to a broad spectrum of national and
regional laws and regulations. These include product safety,
trademarks, competition, employee and customer health & safety,
data, corporate governance, employment and tax. Changes to laws and
regulations, or a major compliance breach could have a material
impact on the business.
-- Sustained breaches of Burberry's intellectual property (IP)
rights or allegations of infringement by Burberry: Counterfeiting,
copyright, trademark and design infringement in the marketplace
could reduce the demand for genuine Burberry merchandise .
CONDENSED GROUP INCOME STATEMENT - UNAUDITED
26 weeks 26 weeks 52 weeks
to 26 to 28 to 28
September September March
2020 2019 2020
Note GBPm GBPm GBPm
------------------------------------------------ ---- ---------- ---------- ---------
Revenue 3 877.7 1,281.2 2,633.1
Cost of sales (273.3) (415.8) (927.6)
------------------------------------------------ ---- ---------- ---------- ---------
Gross profit 604.4 865.4 1,705.5
Net operating expenses (516.3) (663.4) (1,516.8)
------------------------------------------------ ---- ---------- ---------- ---------
Operating profit 88.1 202.0 188.7
Financing
------------------------------------------------ ---- ---------- ---------- ---------
Finance income 1.5 4.5 7.6
Finance expense (16.4) (13.2) (26.6)
Other financing charge (0.4) (0.7) (1.2)
------------------------------------------------ ---- ---------- ---------- ---------
Net finance expense 5 (15.3) (9.4) (20.2)
------------------------------------------------ ---- ---------- ---------- ---------
Profit before taxation 72.8 192.6 168.5
Taxation 6 (24.5) (42.5) (46.9)
------------------------------------------------ ---- ---------- ---------- ---------
Profit for the period 48.3 150.1 121.6
------------------------------------------------ ---- ---------- ---------- ---------
Attributable to:
Owners of the Company 49.3 150.3 121.7
Non-controlling interest (1.0) (0.2) (0.1)
------------------------------------------------ ---- ---------- ---------- ---------
Profit for the period 48.3 150.1 121.6
------------------------------------------------ ---- ---------- ---------- ---------
Earnings per share
Basic 7 12.2p 36.6p 29.8p
Diluted 7 12.2p 36.4p 29.8p
------------------------------------------------ ---- ---------- ---------- ---------
GBPm GBPm GBPm
Reconciliation of adjusted profit before
taxation:
Profit before taxation 72.8 192.6 168.5
Adjusting operating items:
Cost of sales 4 (6.6) - 68.3
Net operating expenses 4 (30.6) 1.4 176.1
Adjusting financing items 4 0.4 0.7 1.2
------------------------------------------------ ---- ---------- ---------- ---------
Adjusted profit before taxation - non-GAAP
measure 36.0 194.7 414.1
------------------------------------------------ ---- ---------- ---------- ---------
Adjusted earnings per share - non-GAAP measure
Basic 7 4.6p 37.1p 78.9p
Diluted 7 4.6p 36.9p 78.7p
------------------------------------------------ ---- ---------- ---------- ---------
Dividends per share
Proposed interim (not recognised as a liability
at period end) 8 - 11.3p 11.3p
Final (not recognised as a liability at
28 March) 8 N/A N/A -
------------------------------------------------ ---- ---------- ---------- ---------
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME -
UNAUDITED
26 weeks 26 weeks 52 weeks
to 26 to 28 to 28
September September March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- --------
Profit for the period 48.3 150.1 121.6
Other comprehensive income1:
Cash flow hedges 0.4 (0.6) 2.7
Net investment hedges - 1.9 (1.2)
Foreign currency translation differences 4.3 23.0 18.5
Tax on other comprehensive income:
Cash flow hedges (0.1) 0.1 (0.5)
Net investment hedges - (0.4) 0.2
Foreign currency translation differences 0.3 (1.5) (0.9)
-------------------------------------------- ---------- ---------- --------
Other comprehensive income for the period,
net of tax 4.9 22.5 18.8
-------------------------------------------- ---------- ---------- --------
Total comprehensive income for the period 53.2 172.6 140.4
-------------------------------------------- ---------- ---------- --------
Total comprehensive income attributable
to:
Owners of the Company 54.3 172.6 140.4
Non-controlling interest (1.1) - -
-------------------------------------------- ---------- ---------- --------
53.2 172.6 140.4
------------------------------------------- ---------- ---------- --------
1. All items included in other comprehensive income may
subsequently be reclassified to profit and loss in a future
period.
CONDENSED GROUP BALANCE SHEET - UNAUDITED
As at Restated1
26 September As at As at
2020 28 September 28 March
GBPm 2019 2020
Note GBPm GBPm
--------------------------------------------- ---- -------------- ------------- ---------
ASSETS
Non-current assets
Intangible assets 9 253.4 238.2 247.0
Property, plant and equipment 10 295.4 319.9 294.9
Right-of-use assets 11 824.7 919.3 834.0
Investment properties 2.6 2.5 2.5
Deferred tax assets 153.8 151.0 171.5
Trade and other receivables 12 49.6 51.1 53.7
1,579.5 1,682.0 1,603.6
--------------------------------------------- ---- -------------- ------------- ---------
Current assets
Inventories 13 485.4 535.6 450.5
Trade and other receivables 12 279.4 271.5 252.1
Derivative financial assets 5.0 2.7 6.7
Income tax receivables 73.9 18.4 50.4
Cash and cash equivalents 14 1,199.5 715.4 928.9
--------------------------------------------- ---- -------------- ------------- ---------
2,043.2 1,543.6 1,688.6
--------------------------------------------- ---- -------------- ------------- ---------
Total assets 3,622.7 3,225.6 3,292.2
--------------------------------------------- ---- -------------- ------------- ---------
LIABILITIES
Non-current liabilities
Trade and other payables 15 (103.5) (109.4) (102.3)
Lease liabilities (867.2) (872.6) (910.0)
Borrowings 18 (296.7) - (300.0)
Deferred tax liabilities (0.1) (3.3) (0.1)
Retirement benefit obligations (1.9) (1.6) (1.9)
Provisions for other liabilities and charges 16 (30.8) (25.7) (28.6)
--------------------------------------------- ---- -------------- ------------- ---------
(1,300.2) (1,012.6) (1,342.9)
--------------------------------------------- ---- -------------- ------------- ---------
Current liabilities
Trade and other payables 15 (410.1) (625.2) (447.5)
Bank overdrafts 17 (61.6) (45.4) (41.6)
Lease liabilities (224.8) (213.4) (215.5)
Borrowings 18 (299.1) - -
Derivative financial liabilities (1.9) (4.2) (4.8)
Income tax liabilities (29.2) (8.3) (7.9)
Provisions for other liabilities and charges 16 (18.9) (15.2) (13.2)
(1,045.6) (911.7) (730.5)
--------------------------------------------- ---- -------------- ------------- ---------
Total liabilities (2,345.8) (1,924.3) (2,073.4)
--------------------------------------------- ---- -------------- ------------- ---------
Net assets 1,276.9 1,301.3 1,218.8
--------------------------------------------- ---- -------------- ------------- ---------
EQUITY
Capital and reserves attributable to owners
of the Company
Ordinary share capital 19 0.2 0.2 0.2
Share premium account 221.2 219.6 220.8
Capital reserve 41.1 41.2 41.1
Hedging reserve 5.0 4.5 4.7
Foreign currency translation reserve 249.9 248.9 245.2
Retained earnings 756.0 782.3 702.2
--------------------------------------------- ---- -------------- ------------- ---------
Equity attributable to owners of the Company 1,273.4 1,296.7 1,214.2
Non-controlling interest in equity 3.5 4.6 4.6
--------------------------------------------- ---- -------------- ------------- ---------
Total equity 1,276.9 1,301.3 1,218.8
--------------------------------------------- ---- -------------- ------------- ---------
1. Refer to note 2 for details of the restatement.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY - UNAUDITED
Attributable to owners
of the Company
-----------------------------
Ordinary Share
share premium Other Retained Non-controlling Total
capital account reserves earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- --------- --------- ------- --------------- -------
Balance as at 30 March 2019 0.2 216.9 272.3 965.6 1,455.0 5.0 1,460.0
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Adjustment on initial application
of IFRS 161 - - - (57.1) (57.1) (0.4) (57.5)
Adjustment on initial application
of IFRIC 23 - - - (4.4) (4.4) - (4.4)
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Adjusted balance as at 31
March 2019 0.2 216.9 272.3 904.1 1,393.5 4.6 1,398.1
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Profit for the period - - - 150.3 150.3 (0.2) 150.1
Other comprehensive income:
Cash flow hedges - gains
deferred in equity - - 0.3 - 0.3 - 0.3
Cash flow hedges - gains
transferred to income - - (0.9) - (0.9) - (0.9)
Net investment hedges - gains
deferred in equity - - 1.9 - 1.9 - 1.9
Foreign currency translation
differences - - 22.8 - 22.8 0.2 23.0
Tax on other comprehensive
income - - (1.8) - (1.8) - (1.8)
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive income
for the period - - 22.3 150.3 172.6 - 172.6
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Transactions with owners:
Employee share incentive
schemes
Value of share options granted - - - 8.3 8.3 - 8.3
Value of share options
transferred
to liabilities - - - (0.5) (0.5) - (0.5)
Tax on share options granted - - - 0.1 0.1 - 0.1
Exercise of share options - 2.7 - - 2.7 - 2.7
Purchase of own shares
Share buy-back - - - (150.8) (150.8) - (150.8)
Dividends paid in the period - - - (129.2) (129.2) - (129.2)
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Balance as at 28 September
2019 0.2 219.6 294.6 782.3 1,296.7 4.6 1,301.3
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Balance as at 28 March 2020 0.2 220.8 291.0 702.2 1,214.2 4.6 1,218.8
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Profit for the period - - - 49.3 49.3 (1.0) 48.3
Other comprehensive income:
Cash flow hedges - losses
deferred in equity - - (0.2) - (0.2) - (0.2)
Cash flow hedges - losses
transferred to income - - 0.6 - 0.6 - 0.6
Foreign currency translation
differences - - 4.4 - 4.4 (0.1) 4.3
Tax on other comprehensive
income - - 0.2 - 0.2 - 0.2
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive income
for the period - - 5.0 49.3 54.3 (1.1) 53.2
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
Transactions with owners:
Employee share incentive
schemes
Value of share options granted - - - 4.2 4.2 - 4.2
Tax on share options granted - - - 0.3 0.3 - 0.3
Exercise of share options - 0.4 - - 0.4 - 0.4
Balance as at 26 September
2020 0.2 221.2 296.0 756.0 1,273.4 3.5 1,276.9
--------------------------------- -------- -------- --------- --------- ------- --------------- -------
1. Refer to note 2 for details of the restatement
CONDENSED GROUP STATEMENT OF CASH FLOWS - UNAUDITED
26 weeks 26 weeks 52 weeks
to 26 to 28 to 28
September September March
2020 2019 2020
Note GBPm GBPm GBPm
-------------------------------------------------- ---- ---------- ---------- --------
Cash flows from operating activities
Operating profit 88.1 202.0 188.7
Amortisation of intangible assets 14.8 11.9 26.4
Depreciation of property, plant and equipment 30.7 40.3 83.3
Depreciation of right-of-use assets 83.5 107.6 221.1
COVID-19 related rent concessions1 (26.3) - -
impairment charge of intangible assets 9 0.8 0.6 11.6
Net impairment (reversal)/charge of property,
plant and equipment 10 (3.2) (0.4) 26.4
Net impairment (reversal)/charge of right-of-use
assets 11 (15.5) 11.6 140.3
Loss on disposal of property, plant and
equipment and intangible assets - 0.4 0.7
Gain on disposal of right-of-use assets - (1.8) (2.1)
Gain on disposal of Beauty operations - (0.3) (5.0)
Loss/(gain) on derivative instruments 0.6 (0.1) (3.1)
Charge in respect of employee share incentive
schemes 4.2 8.3 2.8
(Payment)/receipt from settlement of equity
swap contracts (1.5) 0.2 0.2
(Increase)/decrease in inventories (34.3) (50.7) 27.4
Increase in receivables (23.1) (27.7) (9.8)
Decrease in payables and provisions (32.4) (41.4) (84.0)
-------------------------------------------------- ---- ---------- ---------- --------
Cash generated from operating activities 86.4 260.5 624.9
Interest received 1.4 4.2 7.2
Interest paid (15.3) (13.1) (26.0)
Taxation paid (9.6) (88.0) (150.3)
-------------------------------------------------- ---- ---------- ---------- --------
Net cash generated from operating activities 62.9 163.6 455.8
Cash flows from investing activities
Purchase of property, plant and equipment (34.5) (40.8) (85.3)
Purchase of intangible assets (11.7) (27.7) (63.5)
Proceeds from sale of property, plant and
equipment - - 3.0
Initial direct costs of right-of-use assets (0.4) - (5.6)
Net cash outflow from investing activities (46.6) (68.5) (151.4)
Cash flows from financing activities
Dividends paid in the period - (129.2) (175.2)
Payment of deferred consideration for acquisition
of non-controlling interest 15 (2.6) (2.7) (2.7)
Proceeds from borrowings 18 595.1 - 300.0
Repayment of borrowings 18 (300.0) - -
Payment of lease principal (61.7) (114.7) (228.4)
Payment on termination of lease - (9.7) (9.7)
Issue of ordinary share capital 0.4 2.7 3.8
Purchase of own shares through share buy-back - (15.3) (150.7)
Net cash inflow/(outflow) from financing
activities 231.2 (268.9) (262.9)
Net increase/(decrease) in cash and cash
equivalents 247.5 (173.8) 41.5
Effect of exchange rate changes 3.1 6.5 8.5
Cash and cash equivalents at beginning of
period 887.3 837.3 837.3
-------------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents at end of period 1,137.9 670.0 887.3
-------------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents as per the Balance
Sheet 14 1,199.5 715.4 928.9
Bank overdrafts 17 (61.6) (45.4) (41.6)
--------------------------------------------- ------- ------ ------
Cash net of overdrafts 1,137.9 670.0 887.3
--------------------------------------------- ------- ------ ------
1. Refer to the Accounting policies section within note 2 for
details on the impact of the COVID-19 related rent concession
amendment to IFRS 16.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. Corporate information
Burberry Group plc and its subsidiaries (the Group) is a global
luxury goods manufacturer, retailer and wholesaler. The Group also
licenses third parties to manufacture and distribute products using
the 'Burberry' trademarks. All of the companies which comprise the
Group are controlled by Burberry Group plc (the Company) directly
or indirectly.
2. Accounting policies and Basis of preparation
Basis of preparation
These condensed consolidated interim financial statements are
unaudited but have been reviewed by the auditors and their report
to the Company is set out on page 39. They were approved by the
Board of Directors on 11 November 2020. These condensed
consolidated interim financial statements do not constitute
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory accounts for the 52 weeks to 28 March
2020 were approved by the Board of Directors on 22 May 2020 and
have been filed with the Registrar of Companies. The report of the
auditors on the statutory accounts for the 52 weeks to 28 March
2020 was unqualified, did not contain an emphasis of matter
paragraph and did not contain a statement under Section 498 of the
Companies Act 2006.
These condensed consolidated interim financial statements for
the 26 weeks to 26 September 2020 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial
Services Authority and with IAS 34, 'Interim Financial Reporting'
as adopted by the European Union. This report should be read in
conjunction with the Group's financial statements for the 52 weeks
to 28 March 2020, which have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
Going concern
The impact of the COVID-19 pandemic on the global economy, the
operating activities of many businesses and on the Group has
resulted in significant economic uncertainty. The ultimate outcome
of the pandemic remains uncertain at the date of signing these
condensed consolidated interim financial statements. In considering
the appropriateness of adopting the going concern basis in
preparing the financial statements, the directors have assessed the
potential cash generation of the Group and considered a range of
downside scenarios. This assessment covers the period of at least
12 months from the date of signing the interim financial
statements. The directors have also considered the forecast for the
period up to the subsequent financial year end, March 2022, for any
indicators that the going concern basis of preparation is not
appropriate.
The scenarios were informed by a comprehensive review of the
macroeconomic downside outcomes using third party projections of
scientific, epidemiological and macroeconomic data for the luxury
fashion industry. They included a range of assumptions and
potential outcomes based on the further impact of COVID-19. The
scenarios are most sensitive to assumptions made on the expected
time it will take for travel and tourism to return to pre-COVID
levels, as well as the severity of local restrictions required to
safeguard against the impact of COVID-19. Additionally, assumptions
regarding future revenue by product, channel and geography,
expenditure plans, cash generation were considered in the
scenarios.
The Group central planning scenario reflects a gradual recovery
from the impact of COVID-19 in all markets, and is impacted by
protracted restrictions on travel and tourism, and by disruptions
from localised lockdowns in the short term. Alternative scenarios
assessed included:
-- A severe but plausible downside representing a reduction in
revenue of 7% in the remainder of the current financial year and
14% in FY2022 against the central planning scenario. Management
consider this represents a severe but plausible downside scenario
appropriate for assessing going concern.
-- A more severe downside, used as a stress test, with a
reduction in revenue of 31% in the remainder of the current
financial year and 28% in FY2022 against the central planning
scenario.
In addition, the potential impact of other principal risks were
considered and added to the impact of these downside scenarios.
Further mitigating actions within management control were
identified under each scenario, including broad-based cost-saving
initiatives, working capital reduction measures and limiting
capital expenditure.
The directors have also considered the Group's current liquidity
and available facilities. As at 26 September 2020, the Group
balance sheet reflects cash net of overdrafts and borrowings of
GBP542.1 million, while cash net of overdrafts is GBP1,137.9
million. In addition the Group has access to a GBP300.0 million
Revolving Credit Facility (RCF), maturing In November 2022, which
is currently undrawn. The Group is in compliance with the covenants
for the RCF and the existing borrowings are not subject to
covenants. Details of cash, overdrafts, borrowings and facilities
are set out in notes 14, 17 and 18 respectively of these financial
statements.
In all the scenarios assessed, taking into account current
liquidity and available facilities, the Group was able to maintain
sufficient liquidity to continue trading. On the basis of the
assessment performed, the directors consider it is appropriate to
continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements for the period
ended 26 September 2020.
Restatement of prior period
During the 52 weeks to 28 March 2020 but subsequent to reporting
interim results for the 26 weeks to 28 September 2019, the Group
reassessed the approach to determine the initial right-of-use asset
impairment upon adoption of IFRS 16 Leases. The prior period
interim accounts have been restated to reflect the impact of this
reassessment. The impact of the reassessment resulted in a change
to the initial right-of-use asset, related deferred tax asset and
amounts recognised directly in equity on adoption.
Reported Adjustment Restated
As at 31 As at 31 As at 31
March March March
2019 2019 2019
GBPm GBPm GBPm
-------------------- --------- ---------- ---------
Right-of-use assets 838.7 39.4 878.1
-------------------- --------- ---------- ---------
Deferred tax assets 25.9 (9.5) 16.4
-------------------- --------- ---------- ---------
Reserves 87.4 (29.9) 57.5
-------------------- --------- ---------- ---------
As a result of the reassessment, the balance sheet as at 28
September 2019 is re-presented to reflect the impact of the change
in the initial balance sheet upon adoption of IFRS 16 Leases.
Changes to the prior period income statement were not material and
hence the income statement has not been restated. There is no
change to the balance sheet at 28 March 2020 since the approach
following the reassessment was applied in the financial statements
for the year ended 28 March 2020.
Reported Restated
26 weeks 26 weeks
to 28 September to 28 September
2019 2019
GBPm GBPm
-------------------- ---------------- ----------------
Right-of-use assets 879.9 919.3
-------------------- ---------------- ----------------
Deferred tax assets 160.5 151.0
-------------------- ---------------- ----------------
Reserves 752.4 782.3
-------------------- ---------------- ----------------
Accounting policies
Accounting policies and presentation are consistent with those
applied in the Group's financial statements for the 52 weeks to 28
March 2020, as set out on pages 213 to 221 of those financial
statements, with the exception of the following:
IFRS 16 Leases - COVID-19-Related Rent Concessions
The COVID-19-Related Rent Concessions amendment to IFRS 16
Leases was adopted by the IASB on 28 May 2020 and endorsed by the
European Union on 12 October 2020. The amendment applies to
accounting periods from 1 June 2020 but early application is
permitted and the Group has elected to apply the amendment in the
current period. The amendment allows for a simplified approach to
accounting for rent concessions occurring as a direct result of
COVID-19 and for which the following criteria are met:
-- The revised consideration is substantially the same, or less
than, the consideration prior to the change;
-- The concessions affects only payments originally due on or before 30 June 2021; and,
-- There is no substantive change to other terms and conditions of the lease.
Lessees are not required to assess whether eligible rent
concessions are lease modifications, allowing the lessee to account
for eligible rent concessions as if they were not lease
modifications. During the period, the Group has agreed rent
concessions both in the form of rent forgiveness in which the
landlord has agreed to forgive all or a portion of rents due with
no obligation to be repaid in the future, and rent deferrals in
which the landlord has agreed to forego rents in one period with a
proportional increase in rents due in a future period.
The Group has chosen to account for eligible rent forgiveness as
negative variable lease payments. The rent concession has been
recognised once a legally binding agreement is made between both
parties by derecognising the portion of the lease liability that
has been forgiven and recognising the benefit in the income
statement. As a result, the Group has recognised GBP26.3 million in
COVID-19 related rent concessions in the income statement within
"net operating expenses" in the current period. This has been
presented as an adjusting item (refer to note 4). In the cash flow,
the forgiveness results in lower payments of lease principal. The
negative variable lease payments in the income statement is a
non-cash item which is added back to calculate cash generated from
operating activities.
Rent deferrals do not change the total consideration due over
the life of the lease. Deferred rent payments are recognised as a
payable until the period the original rent payment is due. As a
result, the Group has recognised GBP2.6 million within other
payables. Payments relating to rent deferrals are recognised as
payments of lease principal when the payment is made.
Key sources of estimation uncertainty
Preparation of the condensed consolidated interim financial
statements in conformity with IFRS requires that management make
certain estimates and assumptions that affect the measurement of
reported revenues, expenses, assets and liabilities and the
disclosure of contingent liabilities.
If in the future such estimates and assumptions, which are based
on management's best estimates at the date of the financial
statements, deviate from actual circumstances, the original
estimates and assumptions will be updated as appropriate in the
period in which the circumstances change.
Estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The key areas where the estimates and assumptions applied have a
significant risk of causing a material adjustment to the carrying
value of assets and liabilities are consistent with those applied
in the Group's financial statements for the 52 weeks to 28 March
2020, as set out on pages 212 to 213 of those financial
statements.
For details of changes to significant estimates for impairment
of property, plant and equipment and right-of-use assets and for
inventory provisioning in the current period, refer to notes 10 and
13 respectively. There have been no changes to the significant
estimates relating to uncertain tax positions in the period.
Key judgements in applying the Group's accounting policies
Judgements are those decisions made when applying accounting
policies which have a significant impact on the amounts recognised
in the Group financial statements. Key judgements that have a
significant impact on the amounts recognised in the condensed
consolidated interim financial statements for the 26 weeks to 26
September 2020 and 28 September 2019 are consistent with those
applied in the Group's financial statements for the 52 weeks to 28
March 2020, as set out on page 213 of those financial
statements.
Translation of the results of overseas businesses
The results of overseas subsidiaries are translated into the
Group's presentation currency of Sterling each month at the
weighted average exchange rate according to the phasing of the
Group's trading results. The weighted average exchange rate is
used, as it is considered to approximate the actual exchange rates
on the dates of the transactions. The assets and liabilities of
such undertakings are translated at period end exchange rates.
Differences arising on the retranslation of the opening net
investment in subsidiary companies, and on the translation of their
results, are taken directly to the foreign currency translation
reserve within equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
The principal exchange rates used were as follows:
Average rate Closing rate
------------------------------------------ ---------------------------- ---------
26 weeks 52 weeks As at
26 weeks to to As at 28 September As at
to 26 September 28 September 28 March 26 September 2019 28 March
2020 2019 2020 2020 2020
---------------------- ---------------- ------------- --------- ------------- ------------- ---------
Euro 1.12 1.12 1.14 1.09 1.13 1.12
US Dollar 1.26 1.26 1.27 1.27 1.23 1.24
Chinese Yuan Renminbi 8.87 8.71 8.88 8.67 8.77 8.75
Hong Kong Dollar 9.79 9.82 9.89 9.85 9.65 9.64
Korean Won 1,525 1,486 1,504 1,497 1,480 1,512
---------------------- ---------------- ------------- --------- ------------- ------------- ---------
Adjusted profit before taxation
In order to provide additional consideration of the underlying
performance of the Group's ongoing business, the Group's results
include a presentation of Adjusted operating profit and Adjusted
profit before taxation (adjusted PBT). Adjusted PBT is defined as
profit before taxation and before adjusting items. Adjusting items
are those items which, in the opinion of the directors, should be
excluded in order to provide a consistent and comparable view of
the performance of the Group's ongoing business. Generally, this
will include those items that are largely one-off and material in
nature as well as income or expenses relating to acquisitions or
disposals of businesses or other transactions of a similar nature,
including the impact of changes in fair value of expected future
payments or receipts relating to these transactions. Adjusting
items are identified and presented on a consistent basis each year
and a reconciliation of adjusted PBT to profit before tax is
included in the financial statements. Adjusting items and their
related tax impacts, as well as adjusting taxation items, are added
back to/deducted from profit attributable to owners of the Company
to arrive at adjusted earnings per share. Refer to note 4 for
further details of adjusting items.
3. Segmental analysis
The Chief Operating Decision Maker has been identified as the
Board of Directors. The Board reviews the Group's internal
reporting in order to assess performance and allocate resources.
Management has determined the operating segments based on the
reports used by the Board. The Board considers the Group's business
through its two channels to market, being retail/wholesale and
licensing.
Retail/wholesale revenues are generated by the sale of luxury
goods through Burberry mainline stores, concessions, outlets and
digital commerce as well as Burberry franchisees, prestige
department stores globally and multi-brand specialty accounts. The
flow of global product between retail and wholesale channels and
across our regions is monitored and optimised at a corporate level
and implemented via the Group's inventory hubs situated in Europe
and the US.
Licensing revenues are generated through the receipt of
royalties from global licensees of beauty products, eyewear and
from licences relating to the use of non-Burberry trademarks in
Japan.
The Board assesses channel performance based on a measure of
adjusted operating profit. This measurement basis excludes the
effects of adjusting items. The measure of earnings for each
operating segment that is reviewed by the Board includes an
allocation of corporate and central costs. Interest income and
charges are not included in the result for each operating segment
that is reviewed by the Board.
Retail/Wholesale Licensing Total
----------------------------- ---------------------------- ----------------------------
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks
to 26 to 28 to 26 to 28 to 26 to 28
September September September September September September
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Retail 703.8 1,004.2 - - 703.8 1,004.2
Wholesale 155.8 253.3 - - 155.8 253.3
Licensing - - 18.4 24.5 18.4 24.5
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Total segment
revenue 859.6 1,257.5 18.4 24.5 878.0 1,282.0
Inter-segment
revenue1 - - (0.3) (0.8) (0.3) (0.8)
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Revenue from
external
customers 859.6 1,257.5 18.1 23.7 877.7 1,281.2
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Adjusted
operating
profit 34.2 181.9 16.7 21.5 50.9 203.4
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Adjusting
items2 36.8 (2.1)
Finance income 1.5 4.5
Finance expense (16.4) (13.2)
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Profit before
taxation 72.8 192.6
--------------- ------------- ------------- ------------- ------------- ------------- --------------
Retail/Wholesale Licensing Total
---------------------------- ------------- -----------------------------
52 weeks to 28 March 2020 GBPm GBPm GBPm
------------------------------ ---------------------------- ------------- -----------------------------
Retail 2,110.2 - 2,110.2
Wholesale 475.8 - 475.8
Licensing - 48.5 48.5
------------------------------ ---------------------------- ------------- -----------------------------
Total segment revenue 2,586.0 48.5 2,634.5
Inter-segment revenue1 - (1.4) (1.4)
------------------------------ ---------------------------- ------------- -----------------------------
Revenue from external
customers 2,586.0 47.1 2,633.1
------------------------------ ---------------------------- ------------- -----------------------------
Adjusted operating profit 389.8 43.3 433.1
------------------------------ ---------------------------- ------------- -----------------------------
Adjusting items2 (245.6)
Finance income 7.6
Finance expense (26.6)
------------------------------ ---------------------------- ------------- -----------------------------
Profit before taxation 168.5
------------------------------ ---------------------------- ------------- -----------------------------
1. Inter-segment transfers or transactions are entered into
under the normal commercial terms and conditions that would be
available to unrelated third parties.
2. Refer to note 4 for details of adjusting items.
Additional revenue analysis
All revenue is derived from contracts with customers. The Group
derives Retail and Wholesale revenue from contracts with customers
from the transfer of goods and related services at a point in time.
Licensing revenue is derived over the period the licence agreement
gives the customer access to the Group's trademarks.
26 weeks 52 weeks
26 weeks to 28 September to 28
to 26 September 2019 March
2020 GBPm 2020
Revenue by product division GBPm GBPm
---------------------------- ---------------- ---------------- --------
Accessories 301.2 457.2 947.5
Women's 241.7 387.4 796.5
Men's 257.4 347.2 714.8
Children's/Other 59.3 65.7 127.2
---------------------------- ---------------- ---------------- --------
Retail/Wholesale 859.6 1,257.5 2,586.0
Licensing 18.1 23.7 47.1
---------------------------- ---------------- ---------------- --------
Total 877.7 1,281.2 2,633.1
---------------------------- ---------------- ---------------- --------
26 weeks 52 weeks
26 weeks to 28 September to 28
to 26 September 2019 March
2020 GBPm 2020
Revenue by destination GBPm GBPm
----------------------- ---------------- ---------------- --------
Asia Pacific 439.4 500.2 1,040.5
EMEIA1 250.7 487.4 960.6
Americas 169.5 269.9 584.9
Retail/Wholesale 859.6 1,257.5 2,586.0
Licensing 18.1 23.7 47.1
----------------------- ---------------- ---------------- --------
Total 877.7 1,281.2 2,633.1
----------------------- ---------------- ---------------- --------
1. EMEIA comprises Europe, Middle East, India and Africa.
Due to the seasonal nature of the business, Group revenue is
usually expected to be higher in the second half of the year than
in the first half. The current period has also been significantly
impacted by store closures in all regions as a result of COVID-19.
While some of the Group's operating costs are also higher in the
second half of the year, such as contingent rentals and sales
related employee costs, most of the operating costs, in particular
salaries and fixed rentals, are phased more evenly across the year.
As a result, adjusted operating profit is expected to be higher in
the second half of this financial year.
4. Adjusting items
52 weeks
26 weeks 26 weeks to 28
to 26 September to 28 September March
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------------------- ---------------- ---------------- --------
Adjusting operating items
Impact of COVID-19:
Impairment of retail cash generating units (23.0) - 156.5
Impairment of inventory (6.6) - 68.3
Impairment of intangible assets - - 10.0
Impairment of receivables (2.6) - 11.1
Other impacts of COVID-19 - - (5.0)
COVID-19 related rent concessions (26.3) - -
Other adjusting items:
Gain on disposal of Beauty operations - (0.3) (5.0)
Restructuring costs 22.1 1.4 10.6
Revaluation of deferred consideration liability (0.8) 0.3 (2.1)
Total adjusting operating items (37.2) 1.4 244.4
----------------------------------------------------- ---------------- ---------------- --------
Adjusting financing items
Finance charge on deferred consideration liability 0.4 0.7 1.2
Total adjusting financing items 0.4 0.7 1.2
----------------------------------------------------- ---------------- ---------------- --------
Impact of COVID-19
COVID-19 has impacted both business operations and financial
markets worldwide. The ultimate impact of this pandemic is unclear
and hence the measurement of its impacts requires a significant
degree of estimation. In the financial statements for the year
ended 28 March 2020, the Group recorded adjusting items relating to
the impairment of the carrying value of assets as a result of the
expected impact of COVID-19 on the Group's activities and future
trading. The assumptions relating to these impairments have been
reviewed at 26 September 2020 and updated where appropriate. The
impact of any change in assumptions have been presented as an
update to the adjusting item charge.
Impairment of retail cash generating units
During the 52 weeks to 28 March 2020, an impairment charge of
GBP156.5 million was recorded within net operating expenses for
impairment of retail store assets due to the impact of COVID-19. A
charge of GBP28.4 million was recorded against property, plant and
equipment and a charge of GBP128.1 million was recorded against
right-of-use assets. A related tax credit of GBP28.7 million was
also recognised in the year. This charge was recognised as an
adjusting item, in accordance with the Group's accounting policy,
as it is considered to be material and one-off in nature.
During the 26 weeks to 26 September 2020, a net impairment
reversal of GBP23.0 million has been recorded for reassessment of
the impairment of retail store assets. This comprised a charge of
GBP1.5 million and a reversal of GBP5.5 million against property,
plant and equipment and a charge of GBP10.3 million and a reversal
of GBP29.3 million against right-of-use assets. A related tax
charge of GBP4.9 million has also been recognised in the period.
Refer to note 10 for details of impairment of retail cash
generating units.
Impairment of inventory
During the 52 weeks to 28 March 2020, inventory provisions of
GBP68.3 million were recorded in cost of sales due to the impact of
COVID-19, which relates to current and recent seasons that under
more normal circumstances would be expected to sell through with
limited loss. A related tax credit of GBP12.5 million was also
recognised in the year. This charge was recognised as an adjusting
item, in accordance with the Group's accounting policy, as it is
considered to be material and one-off in nature.
During the 26 weeks to 26 September 2020, a GBP6.6 million
reversal of inventory provisions has been recorded on reassessment
of the provision. A related tax charge of GBP1.1 million has also
been recognised in the period. Refer to note 13 for details of
inventory provisions.
Impairment of receivables
During the 52 weeks to 28 March 2020, due to the global
financial uncertainty arising from COVID-19, management reassessed
and increased the expected loss rates for trade and other
receivables, resulting in a charge of GBP11.1 million reported
within net operating expenses for impairment of receivables in the
year. A related tax credit of GBP2.1 million was also recognised in
the year. This charge was recognised as an adjusting item, in
accordance with the Group's accounting policy, as it is considered
to be material and one-off in nature.
During the 26 weeks to 26 September 2020, an impairment reversal
of GBP2.6 million has been recorded for reassessment of the
impairment against receivables. A related tax charge of GBP0.6
million has also been recognised in the period.
Impact of COVID-19 (continued)
COVID-19 related rent concessions
The Group has elected to apply the COVID-19-Related Rent
Concessions amendment to IFRS 16 in the current period as described
in note 2. Eligible rent forgiveness amounts have been treated as
negative variable lease payments, resulting in a credit of GBP26.3
million for the 26 weeks to 26 September 2020 being recorded in net
operating expenses. A related tax charge of GBP4.3 million has also
been recognised in the period. This credit has been recognised as
an adjusting item, in accordance with the Group's accounting
policy, as it is considered to be material and one-off in
nature.
Restructuring costs
Restructuring costs of GBP4.3 million (last half year: GBP1.4
million; last full year: GBP10.6 million) were incurred in the
current period, arising as a result of the Group's cost-efficiency
programme announced in May 2016. These costs were recorded in net
operating expenses and are presented as an adjusting item as they
are considered material and discrete in nature, being part of a
restructuring programme running from May 2016 to March 2021. The
costs in the current period are principally attributable to
redundancies and functional restructuring costs. A related tax
credit of GBP1.0 million (last half year: GBP0.4 million; last full
year: GBP2.2 million) has also been recognised in the current
period.
In July 2020, the Group announced organisational changes which
include the creation of three new business units, allowing the
Group to pool expertise within each unit to enhance product focus,
increase agility and elevate quality. As part of these
organisational changes, which include office space rationalisation,
the Group will further streamline office-based functions to help
improve efficiency, which is anticipated to incur restructuring
costs of GBP45.0 million. Restructuring costs of GBP17.8 million
were incurred in the current period in relation to these
organisational changes. The costs principally relate to
redundancies and vacant property. These costs are recorded in net
operating expenses. They are presented as an adjusting item, in
accordance with the Group's accounting policy, as the anticipated
cost of the restructuring is considered material and discrete in
nature. A related tax credit of GBP3.7 million has also been
recognised in the current period.
Items relating to the deferred consideration liability
On 22 April 2016, the Group entered into an agreement to
transfer the economic right of the non-controlling interest in
Burberry Middle East LLC to the Group in exchange for consideration
of contingent payments to be made to the minority shareholder over
the period to 2023.
A credit of GBP0.8 million in relation to the revaluation of
this balance has been recognised in net operating expenses for the
26 weeks to 26 September 2020 (last half year: charge of GBP0.3
million; last full year: credit of GBP2.1 million). A financing
charge of GBP0.3 million in relation to the unwinding of the
discount on the non-current portion of the deferred consideration
liability has also been recognised for the 26 weeks to 26 September
2020 (last half year: GBP0.5 million; last full year: GBP1.0
million). These movements are unrealised.
On 19 September 2018, the Group acquired Burberry Manifattura
S.R.L. Consideration for the acquisition included a future
performance related deferred consideration payment to be made in
2021. A financing charge of GBP0.1 million in relation to the
unwinding of the discount on the non-current portion of the
deferred consideration liability has been recognised for the 26
weeks to 26 September 2020 (last half year: GBP0.2 million; last
full year: GBP0.2 million). This movement is unrealised.
No tax has been recognised on either of these items, as the
future payments are not considered to be deductible for tax
purposes. These items are presented as adjusting items in
accordance with the Group's accounting policy, as they arise from
changes in the value of the liability for expected future payments
relating to the purchase of a non-controlling interest in the Group
and acquisition of a subsidiary respectively.
Adjusting items relating to prior periods
Impact of COVID-19
Impairment of intangible assets
During the 52 weeks to 28 March 2020, following changes to
management investment plans, due to the impact of COVID-19, an
impairment charge of GBP10.0 million was recorded in relation to
computer software assets under construction. Due to resulting delay
in the development of this software, management no longer expected
to fully utilise the expenditure incurred to date. A related tax
credit of GBP1.9 million was also recognised in the year. This
charge was recognised as an adjusting item, in accordance with the
Group's accounting policy, as it is considered one-off in
nature.
Other impacts of COVID-19
During the 52 weeks to 28 March 2020, a credit of GBP5.0
million, principally related to the reversal of accrued costs for
share-based payments no longer expected to vest as a result of the
impact of COVID-19 on the expected performance of the Group, was
presented as an adjusting item. A related tax charge of GBP1.0
million was also recognised in the year.
Adjusting items relating to prior periods (continued)
Gain on disposal of Beauty operations
During the year ended 31 March 2018, the Group entered into two
agreements with Coty Geneva SARL Versoix (Coty) to grant Coty a
licence to sell its fragrance and beauty products and to transfer
the Group's Beauty operations to Coty. In the 26 weeks to 28
September 2019 a credit of GBP0.3 million (last full year: GBP5.0
million) was recorded relating to reassessments of provisions for
contract termination and consideration for assets transferred to
Coty on completion. A related tax charge of GBP0.1 million was also
recognised in the 26 weeks to 28 September 2019 (last full year:
GBP1.0 million). The net gain on disposal was presented as an
adjusting item in accordance with the Group's accounting policy as
it arose from the disposal of a business.
5. Financing
52 weeks
26 weeks 26 weeks to 28
to 26 September to 28 September March
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------------------- ---------------- ---------------- --------
Bank interest income - amortised cost 0.3 1.2 2.1
Other finance income - amortised cost 0.2 0.4 0.6
--------------------------------------------------- ---------------- ---------------- --------
Finance income - amortised cost 0.5 1.6 2.7
Bank interest income - fair value through profit
and loss 1.0 2.9 4.9
Finance income 1.5 4.5 7.6
Interest expense on lease liabilities (12.4) (12.6) (24.9)
Interest expense on overdrafts (0.1) (0.2) (0.5)
Interest expense on borrowings (1.9) - (0.1)
Bank charges (0.8) (0.3) (0.8)
Other finance expense (1.2) (0.1) (0.3)
--------------------------------------------------- ---------------- ---------------- --------
Finance expense (16.4) (13.2) (26.6)
--------------------------------------------------- ---------------- ---------------- --------
Finance charge on deferred consideration liability (0.4) (0.7) (1.2)
Net finance expense (15.3) (9.4) (20.2)
--------------------------------------------------- ---------------- ---------------- --------
6. Taxation
The tax charge on adjusted profit before tax for the 26 weeks to
26 September 2020 has been calculated based on an estimated
effective underlying rate of tax on adjusted profit before taxation
for the full year. Tax on prior year adjustments have been recorded
as identified during the period, resulting in an effective tax rate
on adjusted profit before tax in the period of 50.9% (last half
year: 22.0%; last full year: 22.3%). Tax on adjusting items has
been recognised at the prevailing tax rates as appropriate. The
resulting effective tax rate on reported profit before taxation is
33.6% (last half year: 22.1%; last full year: 27.9%). The effective
tax rate on adjusted profit before tax for the full year is
estimated to be 30.0% (last full year: 22.3%).
Total taxation recognised in the condensed group income
statement comprises:
26 weeks 52 weeks
26 weeks to 28 September to 28
to 26 September 2019 March
2020 GBPm 2020
GBPm GBPm
--------------------------------------- ---------------- ---------------- --------
Tax on adjusted profit before taxation 18.3 42.8 92.3
Tax on adjusting items (note 4) 6.2 (0.3) (45.4)
Total taxation charge 24.5 42.5 46.9
--------------------------------------- ---------------- ---------------- --------
7. Earnings per share
The calculation of basic earnings per share is based on profit
or loss attributable to owners of the Company for the period
divided by the weighted average number of ordinary shares in issue
during the period. Basic and diluted earnings per share based on
adjusted profit before taxation are also disclosed to indicate the
underlying profitability of the Group.
26 weeks 52 weeks
26 weeks to 28 September to 28
to 26 September 2019 March
2020 GBPm 2020
GBPm GBPm
---------------------------------------------------- ---------------- ---------------- --------
Attributable profit for the period before adjusting
items1 18.6 152.1 321.9
Effect of adjusting items1 (after taxation) 30.7 (1.8) (200.2)
---------------------------------------------------- ---------------- ---------------- --------
Attributable profit for the period 49.3 150.3 121.7
---------------------------------------------------- ---------------- ---------------- --------
1. Refer to note 4 for details of adjusting items.
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 the
Group's ESOP trusts and treasury shares held by the Company or its
subsidiaries.
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 options and awards made under the employee
share incentive schemes, which will have a dilutive effect when
exercised.
26 weeks 52 weeks
26 weeks to 28 September to 28
to 26 September 2019 March
2020 Millions 2020
Millions Millions
------------------------------------------------ ---------------- ---------------- ---------
Weighted average number of ordinary shares in
issue during the period 403.9 410.2 408.0
Dilutive effect of the employee share incentive
schemes 0.8 2.3 1.0
------------------------------------------------ ---------------- ---------------- ---------
Diluted weighted average number of ordinary
shares in issue during the period 404.7 412.5 409.0
------------------------------------------------ ---------------- ---------------- ---------
8. Dividends paid to owners of the Company
The directors have elected not to declare an interim dividend in
respect of the 26 weeks to 26 September 2020 (last half year:
11.3p).
No dividend was paid during the period to 26 September 2020 in
relation to the year ended 28 March 2020 (last half year:
31.5p).
9. Intangible assets
Goodwill at 26 September 2020 is GBP110.5 million (last half
year: GBP109.7 million). There were no additions to goodwill in the
period (last half year: GBPnil).
In the period there were additions to other intangible assets of
GBP20.7 million (last half year: GBP28.4 million) and disposals
with a net book value of GBPnil (last half year: GBPnil).
Capital commitments contracted but not provided for by the Group
amounted to GBP4.6 million (last half year: GBP6.6 million).
Impairment testing
Assets that have an indefinite useful economic life are not
subject to amortisation and are tested annually for impairment.
Goodwill is the only intangible asset category with an
indefinite useful economic life included within total intangible
assets at 26 September 2020. Management has performed a review for
indicators of impairment as at 26 September 2020 and concluded that
there are no indicators at this time as performance in the period
exceeded those set out in the assumptions applied at 28 March 2020.
The annual impairment test will be performed at 27 March 2021.
The impairment charge for other intangible assets for the 26
weeks to 26 September 2020 is GBP0.8 million (last half year:
GBP0.6 million).
10. Property, plant and equipment
In the period there were additions to property, plant and
equipment of GBP28.8 million (last half year: GBP43.3 million) and
disposals with a net book value of GBPnil (last half year: GBP0.4
million).
Capital commitments contracted but not provided for by the Group
amounted to GBP23.9 million (last half year: GBP27.0 million).
Impairment testing
COVID-19 is expected to have a significant impact on the Group's
retail operations for the remainder of the current financial year
and beyond. In the financial statements for the year ended 28 March
2020, management carried out a review for potential impairment
across the whole retail portfolio, taking into account management's
estimate of the impact of COVID-19. As a result, a charge of
GBP156.5 million was recorded, as an adjusting item, relating to
the impairment of retail cash generating units as a result of the
impact of COVID-19.
During the current period, management reviewed their assumptions
relating to the impact of COVID-19 on the impairment of retail cash
generating units. Retail cash generating units were reviewed for
any indication of impairment. The pre-tax cash flow projections
used for this review were based on financial plans of expected
revenues and costs of each retail cash generating unit, approved by
management, and extrapolated beyond the current year to the lease
end dates using growth rates and inflation rates appropriate to
each store's location. The pre-tax discount rates used in these
calculations were between 9.5% and 14.2% (last half year: between
9.5% and 14.0%) based on the Group's weighted average cost of
capital adjusted for country-specific borrowing costs, tax rates
and risks. Where indicators of impairment have been identified and
the value-in-use was less than the carrying value of the cash
generating unit, an impairment of property, plant and equipment and
right-of-use asset was recorded. Potential alternative uses for
property, such as subletting of leasehold or sale of freehold, were
considered in estimating the value for calculating impairment
charges. A review for any other indicators of impairment across the
retail portfolio was also carried out.
During the 26 weeks to 26 September 2020, a net impairment
reversal of GBP23.0 million (last half year: net impairment charge
of GBP12.9 million) was recorded as a result of a review of
impairment of retail store assets, reflecting improved trading
expectations compared to those assumed at 28 March 2020. A charge
of GBP1.5 million and a reversal of GBP5.5 million was recorded
against property, plant and equipment (last half year: net
impairment reversal of GBP0.4 million) and a charge of GBP10.3
million and a reversal of GBP29.3 million was recorded against
right-of-use assets (last half year: net impairment charge of
GBP13.3 million). Refer to note 11 for further details of
right-of-use assets.
Management has considered the potential impact of changes in
assumptions on the impairment recorded against the Group's retail
assets. Given the significant uncertainty regarding the impact of
COVID-19 on the Group's retail operations and on the global
economy, management have considered sensitivities to the impairment
charge as a result of changes to the estimate of future revenues
achieved by the retail stores. The sensitivities applied are an
increase or decrease in revenue of 15% from the estimate used to
determine the impairment charge. It is estimated that a 15%
decrease/increase in revenue assumptions for the 52 weeks to 27
March 2021, with no change to subsequent forecast revenue growth
rate assumptions, would result in a GBP40.3 million increase /
GBP24.3 million decrease in the impairment charge of retail store
assets in the 26 weeks to 26 September 2020.
The net impairment reversal of GBP23.0 million, relating to the
change in assumptions of the impact of COVID-19 on the impairment
charge recorded last year, has been presented as an adjusting item
(last half year: GBPnil). Refer to note 4 for details of adjusting
items.
The net impairment reversal recorded in property, plant and
equipment relates to 22 retail cash generating units (last half
year: net impairment reversal related to 4 retail cash generating
units-) for which the total recoverable amount at the balance sheet
date is GBP31.9 million (last half year: GBP11.7 million).
In addition, an impairment charge of GBP0.8 million (last half
year: GBPnil) was recognised in relation to non-retail assets. As a
result the total net impairment reversal for property, plant and
equipment was GBP3.2 million (last half year: net impairment
reversal of GBP0.4 million).
11. Right-of-use assets
In the period there were additions to right-of-use assets of
GBP32.9 million (last half year: GBP126.9 million). Depreciation of
right-of-use assets of GBP83.5 million (last half year: GBP107.6
million) is included within net operating expenses.
Impairment testing
As a result of the assessment of retail cash generating units
for impairment, an impairment charge of GBP10.3 million and a
reversal of GBP29.3 million, resulting in a net reversal of GBP19.0
million (last half year: net impairment charge of GBP13.3 million)
was recorded for impairment of right-of-use assets. Refer to note
10 for further details of impairment assessment of retail cash
generating units.
The net impairment reversal recorded in right-of-use assets
relates to 23 retail cash generating units (last half year: net
impairment charge related to 4 retail cash generating units) for
which the total recoverable amount at the balance sheet date is
GBP209.4 million (last half year: GBP47.5 million).
In addition, an impairment charge of GBP3.5 million (last half
year: impairment reversal of GBP1.7 million) was recognised in
relation to vacant office premises. This reversal was recognised as
part of restructuring costs in adjusting items. Refer to note 4 for
details of adjusting items. As a result, the net impairment
reversal for right-of-use assets was, in total, GBP15.5 million
(last half year: net impairment charge of GBP11.6 million).
12. Trade and other receivables
As at 26 As at 28 As at
September September 28 March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ---------
Non-current
Deposits and other financial receivables 43.6 44.7 46.9
Other non-financial receivables 2.0 3.4 4.1
Prepayments 4.0 3.0 2.7
---------------------------------------------- ---------- ---------- ---------
Total non-current trade and other receivables 49.6 51.1 53.7
---------------------------------------------- ---------- ---------- ---------
Current
Trade receivables 171.3 147.2 123.5
Provision for doubtful debts (13.4) (5.6) (16.5)
---------------------------------------------- ---------- ---------- ---------
Net trade receivables 157.9 141.6 107.0
Other financial receivables 31.8 37.2 31.9
Other non-financial receivables 38.7 40.0 67.4
Prepayments 41.2 41.7 35.0
Accrued income 9.8 11.0 10.8
---------------------------------------------- ---------- ---------- ---------
Total current trade and other receivables 279.4 271.5 252.1
---------------------------------------------- ---------- ---------- ---------
Total trade and other receivables 329.0 322.6 305.8
---------------------------------------------- ---------- ---------- ---------
The net reversal for impairment of financial receivables in the
period was GBP2.2 million (last half year: charge of GBP0.9
million; last full year: charge of GBP14.3 million). GBP2.6 million
of this net reversal has been presented as an adjusting item (last
half year: GBPnil; last full year: charge of GBP11.1 million).
Refer to note 4 for details of adjusting items.
13. Inventories
Inventory provisions of GBP158.8 million (last half year:
GBP95.0 million; last full year: GBP169.5 million) are recorded,
representing 24.6% (last half year: 15.1%; last full year 27.3%) of
the gross value of inventory. The provisions reflect management's
best estimate of the net realisable value of inventory, where this
is considered to be lower than the cost of the inventory.
As at 28 March 2020, GBP68.3 million of the provision was
included in cost of sales as a result of the estimated reduction in
net realisable value of inventory due to COVID-19 and was presented
as an adjusting item. In the current period, GBP6.6 million of the
provision was released upon re-assessment of the provision, where
inventory previously provided for had been sold above cost in the
period. This reversal is presented as an adjusting item. Refer to
note 4 for details of adjusting items.
Taking into account the significant uncertainty regarding the
outcome of COVID-19 and its impact on retail operations and the
global economy, as well as other factors impacting the net
realisable value of inventory including trading assumptions being
higher or lower than expected, management consider that a
reasonable potential range of outcomes could result in an increase
or decrease in inventory provisions of GBP20.0 million in the next
12 months. This would result in a potential range of inventory
provisions of 21.5% to 27.8% as a percentage of the gross value of
inventory as at 26 September 2020.
14. Cash and cash equivalents
As at 26 As at 28 As at
September September 28 March
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------------- ---------- ---------- ---------
Cash and cash equivalents held at amortised
cost
Cash at bank and in hand 195.3 160.4 138.7
Short-term deposits 155.5 112.2 126.3
--------------------------------------------- ---------- ---------- ---------
350.8 272.6 265.0
Cash and cash equivalents held at fair value
through profit and loss
Short-term deposits 848.7 442.8 663.9
--------------------------------------------- ---------- ---------- ---------
Total 1,199.5 715.4 928.9
--------------------------------------------- ---------- ---------- ---------
Cash and cash equivalents classified as fair value through
profit and loss relate to deposits held in low volatility net asset
value money market funds. The cash is available immediately and,
since the funds are managed to achieve low volatility, no
significant change in value is anticipated. The funds are monitored
to ensure there are no significant changes in value.
As at 26 September 2020 and 28 March 2020, no impairment losses
were identified on cash and cash equivalents held at amortised
cost.
15. Trade and other payables
As at 26 As at 28 As at
September September 28 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ---------
Non-current
Other payables 8.4 3.3 7.1
Deferred income and non-financial accruals 8.0 8.3 4.1
Contract liabilities 73.8 80.3 77.0
Deferred consideration(1) 13.3 17.5 14.1
------------------------------------------- ---------- ---------- ---------
Total non-current trade and other payables 103.5 109.4 102.3
------------------------------------------- ---------- ---------- ---------
Current
Trade payables 121.7 219.4 197.3
Other taxes and social security costs 61.0 49.6 48.1
Other payables(2) 6.2 139.0 3.9
Accruals 200.9 193.9 175.2
Deferred income and non-financial accruals 4.6 5.2 6.0
Contract liabilities 13.5 15.4 12.7
Deferred consideration(1) 2.2 2.7 4.3
------------------------------------------- ---------- ---------- ---------
Total current trade and other payables 410.1 625.2 447.5
------------------------------------------- ---------- ---------- ---------
Total trade and other payables 513.6 734.6 549.8
------------------------------------------- ---------- ---------- ---------
1. Deferred consideration relates to the acquisition of Burberry
Manifattura S.R.L. on 19 September 2018 and of the economic right
to the non-controlling interest in Burberry Middle East LLC on 22
April 2016. The change in the deferred consideration liability in
the period arises as a result of a financing cash outflow and
non-cash movements. Payments of GBP2.6 million were made in the 26
weeks to 26 September 2020 (last half year: GBP2.7 million; last
full year: GBP2.7 million).
2. As at 28 September 2019 other payables included GBP135.5
million relating to the cost of shares not purchased at the balance
sheet date, under an agreement entered into by the Group to
purchase its own shares, together with anticipated stamp duty
arising.
Contract liabilities
Retail contract liabilities relate to unredeemed balances on
issued gift cards and similar products, and advanced payments
received for sales which have not yet been delivered to the
customer. Licensing contract liabilities relate to deferred revenue
arising from the upfront payment for the Beauty licence which is
being recognised in revenue over the term of the licence on a
straight-line basis reflecting access to the trademark over the
licence period to 2032.
As at 26 As at 28 As at
September September 28 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------- ---------- ---------- ---------
Retail contract liabilities 7.0 8.8 6.1
Licensing contract liabilities 80.3 86.9 83.6
------------------------------- ---------- ---------- ---------
Total contract liabilities 87.3 95.7 89.7
------------------------------- ---------- ---------- ---------
16. Provisions for other liabilities and charges
Property Other
obligations costs Total
GBPm GBPm GBPm
---------------------------------------- ------------ ------ -----
Balance as at 28 March 2020 35.5 6.3 41.8
Effect of foreign exchange rate changes 0.2 0.2 0.4
Created during the period 4.6 4.5 9.1
Discount unwind 0.1 - 0.1
Utilised during the period (0.5) (0.2) (0.7)
Released during the period (0.3) (0.7) (1.0)
Balance as at 26 September 2020 39.6 10.1 49.7
---------------------------------------- ------------ ------ -----
Balance as at 28 September 2019 33.3 7.6 40.9
---------------------------------------- ------------ ------ -----
As at 26 As at 28 As at
September September 28 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------ ---------- ---------- ---------
Analysis of total provisions:
Non-current 30.8 25.7 28.6
Current 18.9 15.2 13.2
------------------------------ ---------- ---------- ---------
Total 49.7 40.9 41.8
------------------------------ ---------- ---------- ---------
17. Bank overdrafts
Included within bank overdrafts is GBP60.7 million (last half
year: GBP44.4 million; last full year: GBP40.9 million)
representing balances on cash pooling arrangements in the
Group.
The Group has a number of committed and uncommitted arrangements
agreed with third parties. At 26 September 2020, the Group held
bank overdrafts of GBP0.9 million (last half year: GBP1.0 million;
last full year: GBP0.7 million) excluding balances on cash pooling
arrangements.
The fair value of overdrafts approximate the carrying amount
because of the short maturity of these instruments.
18. Borrowings
As at 28 As at 26
March Proceeds Repayment Non-cash September
2020 from borrowings of borrowings movements 2020
GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ---------------- -------------- ---------- ----------
Non-current
Revolving credit facility 300.0 - (300.0) - -
1.125% GBP300m Medium Term Notes
2025 - 296.7 - - 296.7
Current
Commercial paper issued under
CCFF program - 298.4 - 0.7 299.1
--------------------------------- -------- ---------------- -------------- ---------- ----------
Total borrowings 300.0 595.1 (300.0) 0.7 595.8
--------------------------------- -------- ---------------- -------------- ---------- ----------
On 25 November 2014, the Group entered into a GBP300.0 million
multi-currency revolving credit facility with a syndicate of banks.
In March 2020, the Group drew down on this facility in full. On 9
June 2020 the Group repaid this facility in full. On 18 June 2020
the Group extended the facility for 12 months, and it now matures
in November 2022. A waiver for the existing leverage covenant for
the periods ending up to and including 25 September 2021 and a
restriction on shareholder distributions during the period of the
waiver, which the Group can opt out of prior to 25 September 2021,
was agreed. At 26 September 2020, there were GBPnil outstanding
drawings.
The Group is in compliance with the financial and other
covenants within this facility, taking into account the waiver
referred to above, and has been in compliance throughout the
financial year.
On 14 May 2020, Burberry Limited issued commercial paper with a
face value of GBP300.0 million, issued at a discount with zero
coupon, and a maturity of 17 March 2021. The commercial paper was
issued under a GBP300.0 million facility the Group agreed under the
UK Government sponsored COVID Corporate Finance Facility (CCFF). An
increase to the Group's CCFF of GBP300.0 million to GBP600.0
million was available from 29 May 2020. The additional GBP300.0
million remains undrawn and future drawings will be subject to Bank
of England terms at the date of issue.
On 21 September 2020, Burberry Group plc issued medium term
notes with a face value of GBP300.0 million maturing on 21
September 2025 (the sustainability bond). Proceeds from the
sustainability bond will allow the Group to finance projects which
support the Group's sustainability agenda. Interest on the
sustainability bond is payable semi-annually and the sustainability
bond has no covenants.
The Group had no borrowings during the period ended 28 September
2019.
19. Share capital and reserves
Allotted, called up and fully paid share capital Number GBPm
-------------------------------------------------- ----------- ----
Ordinary shares of 0.05p (last year: 0.05p) each
-------------------------------------------------- ----------- ----
As at 30 March 2019 411,456,001 0.2
Allotted on exercise of options during the period 301,003 -
As at 28 September 2019 411,757,004 0.2
As at 28 March 2020 404,705,886 0.2
Allotted on exercise of options during the period 30,333 -
As at 26 September 2020 404,736,219 0.2
-------------------------------------------------- ----------- ----
Other reserves
Own shares purchased by the Company, as part of a share buy-back
programme, are classified as treasury shares and their cost offset
against retained earnings. When treasury shares are cancelled, a
transfer is made from retained earnings to the capital redemption
reserve, equivalent to the nominal value of the shares purchased
and subsequently cancelled. The cost of shares purchased by
employee share ownership trusts (ESOP trusts) are offset against
retained earnings, as the amounts paid reduce the profits available
for distribution by the Company.
As at 26 September 2020 the amount held against retained
earnings was GBPnil (last half year: GBP17.7 million) including
stamp duty of GBPnil (last half year: GBP0.1 million) in relation
to treasury shares and GBP15.5 million (last half year: GBP20.9
million) in relation to shares purchased by ESOP trusts. As at 26
September 2020, the Company held no treasury shares (last half
year: 0.8 million), with a market value of GBPnil (last half year:
GBP17.6 million) and ESOP trusts held 1.0 million (last half year:
1.3 million) shares in the Company, with a market value of GBP14.9
million (last half year: GBP27.7 million). In the 26 weeks to 26
September 2020 the ESOP trusts and the Company have waived their
entitlement to dividends of GBPnil (last half year: GBP0.4
million).
During the last half year, the Company entered into an agreement
to purchase GBP150.0 million of its own shares as part of a share
buy-back programme. In that period, GBP135.5 million relating to
the cost of shares not yet purchased under this agreement was
charged to retained earnings, with the payment obligation
recognised in other payables. No share buy-back programme was
announced in the current period.
20. Related party transactions
The Group's significant related parties are disclosed in the
Annual Report for the 52 weeks to 28 March 2020. There were no
material changes to these related parties in the period, other than
changes to the composition of the Board. Other than total
compensation in respect of key management, no material related
party transactions have taken place during the current period.
21. Fair value disclosure for financial instruments
The Group's principal financial instruments comprise derivative
instruments, cash and cash equivalents, borrowings (including
overdrafts), deferred consideration, trade and other receivables,
and trade and other payables arising directly from operations.
The fair value of the Group's financial assets and liabilities
held at amortised cost approximate their carrying amount due to the
short maturity of these instruments with the exception of GBP13.8
million (last half year: GBP13.5 million) held in non-current other
receivables relating to an interest-free loan provided to a
landlord in Korea. At 26 September 2020, the discounted fair value
of the loan is GBP16.0 million (last half year: GBP15.9 million).
The fair value of the sustainability bond is considered to
approximate its book value due to the proximity of its date of
issue to the balance sheet date.
The measurements for financial instruments carried at fair value
are categorised into different levels in the fair value hierarchy
based on the inputs to the valuation technique used. The different
levels are defined as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly.
Level 3: includes unobservable inputs for the asset or
liability.
Observable inputs are those which are developed using market
data, such as publicly available information about actual events or
transactions. The Group has an established framework with respect
to measurement of fair values, including Level 3 fair values.
The Group regularly reviews any significant inputs which are not
derived from observable market data and considers, where available,
relevant third-party information, to support the conclusion that
such valuations meet the requirements of IFRS. The classification
level in the fair value hierarchy is also considered periodically
and, if required, financial instruments are transferred on the date
of the event or change in circumstances that caused the transfer.
Significant valuation issues are reported to the Audit
Committee.
The fair value of those cash and cash equivalents measured at
fair value through profit and loss, principally money market funds,
is derived from their net asset value which is based on the value
of the portfolio investment holdings at the balance sheet date.
This is considered to be a level 2 measurement.
The fair value of forward foreign exchange contracts and equity
swap contracts is based on a comparison of the contractual and
market rates and, in the case of forward foreign exchange
contracts, after discounting using the appropriate yield curve as
at the balance sheet date. All Level 2 fair value measurements are
calculated using inputs which are based on observable market
data.
The fair value of the contingent payment component of deferred
consideration is considered to be a Level 3 measurement and is
derived using a present value calculation, incorporating observable
and non-observable inputs. This valuation technique has been
adopted as it most closely mirrors the contractual arrangement.
22. Contingent liabilities
The Group is subject to claims against it and to tax audits in a
number of jurisdictions which arise in the ordinary course of
business. These typically relate to Value Added Taxes, sales taxes,
customs duties, corporate taxes, transfer pricing, payroll taxes,
various contractual claims, legal proceedings and other matters.
Where appropriate, the estimated cost of known obligations have
been provided in these financial statements in accordance with the
Group's accounting policies. The Group does not expect the outcome
of current similar contingent liabilities to have a material effect
on the Group's financial condition.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that the condensed consolidated interim
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the Interim
Management Report and condensed consolidated interim financial
statements include a fair review of the information required by
Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:
- an indication of important events that have occurred during
the first 26 weeks of the financial year and their impact on the
condensed consolidated interim financial statements, and a
description of the principal risks and uncertainties for the
remaining 26 weeks of the financial year; and
- material related party transactions in the first 26 weeks of
the financial year and any material changes in the related party
transactions described in the last Annual Report.
The directors of Burberry Group plc are consistent with those
listed in the Burberry Group plc Annual Report for the 52 weeks to
28 March 2020 with the exception of Jeremy Darroch who retired from
the Board on 15 July 2020.
A list of current directors is maintained on the Burberry Group
plc website: www.burberryplc.com.
By order of the Board
Marco Gobbetti
Chief Executive Officer
11 November 2020
Julie Brown
Chief Operating and Financial Officer
11 November 2020
INDEPENT REVIEW REPORT TO BURBERRY GROUP PLC
INDEPENT REVIEW REPORT TO BURBERRY GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
26 week period ended 26 September 2020 which comprise the condensed
group income statement, the condensed group statement of
comprehensive income, the condensed group balance sheet, the
condensed group statement of changes in equity, the condensed group
statement of cash flows and the related explanatory notes 1 to
22.
We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 week period ended 26
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
11 November 2020
SHAREHOLDER INFORMATION
General shareholder enquiries
Enquiries relating to shareholdings, such as the transfer of
shares, change of name or address, lost share certificates or
dividend cheques, should be referred to the Company's Registrar
at:
Equiniti,
Aspect House,
Spencer Road, Lancing,
West Sussex, BN99 6DA
Tel: 0371 384 2839. Lines are open 8.30am to 5.30pm, Monday to
Friday.
Please dial +44 (0) 121 415 0804 if calling from outside the UK
or see www.help.shareview.co.uk for additional information.
American Depositary Receipts
We have a sponsored Level 1 American Depositary Receipt (ADR)
programme to enable US investors to purchase ADRs in US Dollars.
Each ADR represents one Burberry ordinary share.
For queries relating to ADRs in Burberry, please use the
following contact details:
BNY Mellon Shareowner Services
P.O. BOX 505000
Louisville, KY 40233-5000
Tel: Toll free within the US: +1 888 269 2377
Tel: International: +1 201 680 6825
Email enquiries: shrrelations@cpushareownerservices.com
or see www.mybnymdr.com for additional information.
MANAGING YOUR SHARES ONLINE
Shareholders and employees can manage their Burberry holdings
online by registering with Shareview, a secure online platform
provided by Equiniti. Registration is a straightforward process and
allows shareholders and employees to:
-- Access information on their shareholdings, including share
balance and dividend information.
-- Sign up for electronic shareholder communications.
-- Buy and sell shares.
-- Update their records following a change of address.
-- Have dividends paid into their bank account.
-- Vote by proxy online in advance of the Company's general meetings.
Burberry encourages shareholders to sign up for electronic
communication as it allows information to be disseminated quickly
and efficiently and also reduces paper usage, which makes a
valuable contribution to our global footprint.
WEBSITE
The investor section of Burberry Group plc's website,
www.burberryplc.com/en/investors.html, contains a wide range of
information and gives access to:
-- Regulatory news.
-- Share price information.
-- Dividend history, share analysis and the investment calculator.
-- Financial results announcements.
-- Frequently asked questions.
It is also possible to sign up to receive email alerts for
Regulatory News Service (RNS) and press releases relating to
Burberry Group plc at www.burberryplc.com/en/alerts.html.
Privacy Policy
Please see our privacy policy at
www.burberryplc.com/en/investors/shareholder-centre/shareholder-privacy-notice.html
for details on how Burberry collects and uses shareholder personal
information.
Dividends
Our capital allocation policy remains in place, prioritising
investment in the long-term growth of our business and dividend
distribution to shareholders. However, given the uncertainty caused
by COVID-19, we believe it is prudent to protect our liquidity
position at this time. As a result, an interim dividend has not
been declared for FY 2020/21.
Duplicate accounts
Shareholders who have more than one account due to inconsistency
in account details may avoid duplicate mailings by contacting
Equiniti and requesting the amalgamation of their share
accounts.
Electronic Communication
Shareholders may at any time choose to receive all shareholder
documentation in electronic form via the internet, rather than in
paper format. Shareholders who decide to register for this option
will receive an email each time a shareholder document is published
on the internet. Shareholders who wish to receive documentation in
electronic form should register online at www.shareview.co.uk.
Equiniti offers a range of shareholder information and services
online at www.shareview.co.uk. A textphone facility for those with
hearing difficulties is available by calling: 0371 384 2255. Lines
are open 8.30am to 5.30pm, Monday to Friday. Please call +44 121
415 7028 if calling from outside the UK.
Financial calendar
Interim results announcement 12 November 2020
Third quarter trading
update 20 January 2021
Preliminary results
announcement May 2021
Annual General Meeting July 2021
---------------------------- ----------------
Registered office
Burberry Group plc
Horseferry House
Horseferry Road,
London, SW1P 2AW.
Registered in England and Wales Registered Number 03458224
www.burberryplc.com.
Share dealing
Burberry Group plc shares can be traded through most banks,
building societies or stock brokers. Equiniti offers a telephone
and internet dealing service. Terms and conditions and details of
the commission charges are available on request.
For telephone dealing, please call 03456 037 037 between 8.00am
and 4.30pm, Monday to Friday, and for internet dealing visit
www.shareview.co.uk/dealing. Shareholders will need their reference
number, which can be found on their share certificate.
ShareGift
Shareholders with a small number of shares, the value of which
makes them uneconomic to sell, may wish to consider donating their
shares to charity through ShareGift, a donation scheme operated by
The Orr Mackintosh Foundation. A ShareGift donation form can be
obtained from Equiniti. Further information is available at
www.sharegift.org or by telephone on 0207 930 3737.
TIPS ON PROTECTING YOUR INFORMATION
-- Keep any documentation that contains your shareholder
reference number in a safe place and shred any unwanted
documentation.
-- Inform Equiniti, the Registrar, promptly when you change address.
-- Consider holding your shares electronically in a CREST account via a nominee.
Share price information
The latest Burberry Group plc share price is available on the
Company's website at www.burberryplc.com.
Unauthorised brokers (boiler room scams)
Shareholders are advised to be very wary of any unsolicited
advice, offers to buy shares at a discount or offers of free
company reports. These are typically from overseas-based 'brokers'
who target UK shareholders offering to sell them what often turn
out to be worthless or high-risk shares in US or UK investments.
These operations are commonly known as boiler rooms.
If you receive any unsolicited investment advice, get the
correct name of the person and organisation, and check that they
are properly authorised by the FCA before getting involved. This
can be done by visiting www.fca.org.uk/register .
If you deal with an unauthorised firm, you will not be eligible
to receive payment under the Financial Services Compensation Scheme
if things go wrong.
If you think you have been approached by an unauthorised firm,
you should contact the FCA consumer helpline on 0800 111 6768.
More detailed information can be found on the FCA website at
www.fca.org.uk/consumers/protect-yourself/unauthorised-firms .
Website
Information about Burberry Group plc, including share price
information and details of results announcements, are available at
www.burberryplc.com .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR KKDBNDBDBODD
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