TIDMBRBY
RNS Number : 6885N
Burberry Group PLC
22 May 2020
22 May 2020
Burberry Group plc
Preliminary results for the 52 weeks ended 28 March 2020
Strong progress against strategy, well prepared to navigate
through COVID
"Prior to Covid-19, we were delivering strong momentum across
our brand and product, with sales ahead of our expectations. Since
then, the global health emergency has had a profound impact on the
world, our industry and Burberry but I am very proud of the way we
have responded. We have taken swift action to mitigate the
financial impact on our business, while prioritising the safety and
wellbeing of our teams and customers. We have a strong balance
sheet and liquidity, with space for investment when markets
recover. We have found new ways to strengthen our connection with
consumers, drawing on our digital leadership. We have also
mobilised our resources in support of the relief efforts. It will
take time to heal but we are encouraged by our strong rebound in
some parts of Asia and are well-prepared to navigate through this
period. Now, more than ever, our strategy to secure our position in
luxury fashion is key. I would like to thank our teams for their
dedication and leadership during these challenging times." Marco
Gobbetti, Chief Executive Officer
In the current year, we have adopted new accounting standard
IFRS 16, recognising operating leases as right of use assets and
lease liabilities on the balance sheet the impact of which is set
out on page 21. Throughout this review, to aid comparability, a pro
forma FY 2020 (see detail on page 47) has been included to be
comparable with FY 2019 results.
Period ended 28 March 30 March % change 28 March % change pro
2020 2019 reported 2020 forma vs March
FX pro forma 2019
--------- -----------
GBP million reported CER*
FX
------------------------------ --------- --------- ----------- ----------- -----
Revenue 2,633 2,720 (3) 2,633 (3) (4)
Retail comparable store
sales* (3%) 2%
Adjusted operating profit* 433 438 (1) 404 (8) (8)
Adjusted operating profit
margin* 16.4% 16.1% 15.3%
Reported operating profit 189 437 (57) 160 (63)
Reported operating profit
margin 7.2% 16.1% 6.1%
Adjusted Diluted EPS
(pence)* 78.7 82.1 (4) 77.9 (5) (5)
Diluted EPS (pence) 29.8 81.7 (64) 29.0 (65)
Free cash flow* 66 301 66
Dividend (pence) 11.3 42.5 (73)
------------------------------ --------- --------- ---------- ----------- ----------- -----
*See page 13 for definitions of alternative performance
measures
-- Strong momentum in brand, product and sales delivered before
the COVID-19 outbreak, ahead of our previous expectations
-- Double digit growth in followers and engagement on social
platforms year on year, including through the crisis
-- Comparable sales -27% in Q4 with around 60% retail stores
closed at end of March. This compares to +4% for the first 9 months
of the year
-- Adjusting items of GBP245m predominantly due to store
impairments and stock provisions relating to COVID resulting from
its expected impact on future cashflows generated by these
assets
-- Year to date sales in Mainland China and Korea already ahead
of the prior year and continuing to show an improving trend
-- Responded rapidly to COVID-19 with a comprehensive cost
mitigation programme tailored to several outcome scenarios whilst
prioritising the safety and wellbeing of our people
-- Retooled our factory in Yorkshire to make gowns and sourced
surgical masks through our global supply chain. To date donated
>150,000 pieces of PPE to NHS and care charities, funded
research into a vaccine developed by the University of Oxford and
donated to charities tackling food poverty in the UK
-- Existing cost saving programme delivered cumulative savings
of GBP125m this year and programme accelerated to deliver
cumulative savings of GBP140m by FY 2021
-- Strong balance sheet with cash of GBP887m including GBP300m
from a drawdown of the RCF in March 2020 and actions in place to
protect liquidity
-- Capital allocation framework retained. However, given current
uncertainty, a final dividend has not been declared, with future
dividend payments to be reviewed at end of FY 2021
FY 2021 outlook***
We are not in a position to provide specific guidance for FY21
at this stage as it is currently challenging to predict the course
of the pandemic and the longer lasting economic consequences.
However, we currently have 50% of our store network closed and we
expect our first quarter (to end June 2020) to be severely impacted
with store closures likely to be at or near peak for most of the
quarter. We are leveraging our digital platforms to forge stronger
connections with our customers and have mitigation plans to
conserve cash and reduce operating costs, whilst retaining
flexibility to respond rapidly and optimise revenues in markets as
they start to recover.
***Full outlook on page 6
All metrics and commentary in the Group Financial Highlights and
Business and Financial Review exclude adjusting items unless stated
otherwise.
The following alternative performance measures are presented in
this announcement: CER, Pro forma FY 2020 results, adjusted profit
measures, comparable sales, free cash flow, cash conversion and
lease-adjusted net debt in the prior period. The definition of
these alternative performance measures are in the Appendix on page
13.
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 3524
Annabel Gleeson VP, Investor Relations annabel.gleeson@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 issue its First Quarter Trading Update on 15 July 2020
-- The AGM will be held on 15 July 2020
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.
Group financial highlights
Revenue
-- Revenue GBP2,633m ,-4% CER, -3% reported
-- Comparable retail store sales -3% (H1: +4%; H2: -9%) with Q4
-27%, materially impacted by the COVID-19 outbreak
Pro forma profit measures
-- Pro forma adjusted operating profit GBP404m, -8% CER. Pro
forma margin 15.3%, down 70bps at CER
-- Gross margin before adjusting items down 100bps as
investments in product quality were partly offset by lower levels
of discounting
-- Operating expenses before adjusting items -4% year on year
benefiting from our cost saving programme and mitigating
actions
-- Pro forma adjusted diluted EPS 77.9p, -5% at both CER and
reported, supported by an effective tax rate reduction of 80bps and
7m share repurchases prior to COVID-19
Reported profit measures
-- Operating profit GBP189m, -57% reported, principally due to
GBP244m of adjusting operating items relating to store impairments,
inventory provisions and other charges resulting from the expected
impact of the COVID-19 pandemic on our future trading
-- Diluted EPS 29.8p, -64% reported, principally due to adjusting items relating to COVID-19
Cash measures
-- Free cash flow of GBP66m (2019: GBP301m) due to lower profit,
accelerated timing of UK tax payments resulting from new HMRC
rules, increased capital investments and working capital
outflows
-- Cash of GBP887m at 28 March 2020 including GBP300m from the
drawdown of our revolving credit facility and after returning
GBP325m cash to shareholders through a combination of dividends
(GBP175m) and share buybacks (GBP150m) completed before the
COVID-19 outbreak
-- Full year dividend 11.3p, down 73% (2019: 42.5p) to protect our future cash position
Summary income statement
Period ended 28 Mar 30 Mar % change 28 Mar % change pro forma
2020 2019 reported 2020 vs Mar 2019
GBP million FX pro forma***
-------- --------------
Reported CER
FX
-------- -------- -------------- ----------- --------
Revenue 2,633 2,720 (3) 2,633 (3) (4)
Cost of sales* (859) (859) - (859) -
--------------------------------- -------- -------- ---------- -------------- ----------- --------
Gross profit* 1,774 1,861 (5) 1,774 (5)
Gross margin %* 67.4% 68.4% (100bps) 67.4% (100bps)
Operating expenses* (1,341) (1,423) (6) (1,370) (4)
Opex as a % of sales* 51.0% 52.3% 52.1%
--------------------------------- -------- -------- ---------- -------------- ----------- --------
Adjusted operating profit* 433 438 (1) 404 (8) (8)
Adjusted operating margin* 16.4% 16.1% 30bps 15.3% (80bps) (70bps)
Adjusting operating
items (244) (1) (244)
--------------------------------- -------- -------- ---------- -------------- ----------- --------
Operating profit 189 437 (57) 160 (63)
Operating margin 7.2% 16.1% 6.1%
Net finance (charge)/credit(**) (20) 4 5
--------------------------------- -------- -------- ---------- -------------- ----------- --------
Profit before taxation 169 441 (62) 165 (63)
Taxation (47) (102) (46)
Attributable profit 122 339 119
Adjusted profit before
taxation* 414 443 (7) 410 (7) (7)
Adjusted EPS (pence)*
(^) 78.7 82.1 (4) 77.9 (5) (5)
EPS (pence)(^) 29.8 81.7 (64) 29.0 (65)
Weighted average number
of ordinary shares (millions) 409.0 415.1 409.0
--------------------------------- -------- -------- ---------- -------------- ----------- --------
*Excludes adjusting items. For detail, see Appendix. **Includes
adjusting finance charge of GBP1m (2019: GBP1m). (^) EPS is
presented on a diluted basis. *** Pro forma is an estimation of the
FY 2020 results when applying the previous accounting standard for
leases, IAS 17 Leases consistent with FY 2019.
BUSINESS AND FINANCIAL REVIEW
FY 2020 was the second year of our journey to transform
Burberry. Our focus in this first phase was on re-energising our
brand, aligning our distribution to our new positioning in luxury
fashion and establishing a new product offering. Against these
objectives, we made strong progress in the year. However, from late
January 2020 the outbreak of COVID-19 had a material negative
effect on consumer demand. We took rapid action to implement
mitigating actions to ensure the safety and well-being of our
people and limit the financial and operational impact on our
business.
Strategic progress
Our strategy to establish ourselves in luxury fashion, with a
greater emphasis on leather and accessories, means we are
positioning Burberry towards the more resilient and fastest growing
segments of the luxury market. Over the last two years we have
successfully established a foundational platform from which to
leverage the Burberry brand over the coming years. This includes a
new, desirable product assortment, better aligned distribution
channels and improved brand perception. In light of the current
environment, our strategy to secure our position in luxury is
key.
In the past 12 months, we increased the availability of new
product in our mainline stores from 10-15% at the start of April
2019 to around 85% by the end of March 2020. Prior to the COVID-19
outbreak, the consumer response was very positive with all new
collections - Summer 2019, Autumn/Winter 2020 and Spring 2020 -
delivering double digit growth in our own stores. We also delivered
growth in sales to luxury wholesale partners compared to the prior
year.
We continued to see a strong response to our most recent
collections. Our Spring/Summer 2020 campaign generated online reach
over three times higher than the previous season. And in February,
our Autumn/Winter 2020 show, Memories, generated a global press
reach of 230 million, up double digits compared to our
Autumn/Winter 2019 show.
We also increased brand heat, inspiring consumers in innovative
ways. Our dedicated Lunar New Year campaign drove industry leading
reach and engagement across social media platforms. After
restrictions eased in Mainland China in mid-March, we live streamed
an event on T-mall with influencer Yvonne Ching browsing our
Shanghai Flagship store, which attracted almost 1.4 million
viewers. In total, our inspiration activations led to strong
double-digit year-on-year growth in followers and engagement on
Instagram and WeChat.
In distribution, we continued to transform our global network.
We opened flagship stores in Beijing, Shanghai and Ginza (Tokyo)
and we continued with our refresh programme with 64 stores now
aligned to our new creative vision. We also exited a cumulative 23
smaller, non-strategic stores previously earmarked for closure.
Meanwhile, in wholesale, the rationalisation of non-luxury doors in
the US is now complete.
Over the last two years, we have transformed our operational
efficiency at Burberry. We have migrated functional support to
Burberry Business Services in Leeds and we have strengthened the
financial platform used to support the business. In FY 2020, this
produced incremental cost savings of GBP20m in the year bringing
the cumulative total to GBP125m. In addition, as part of our drive
to mitigate the impacts of COVID-19, we accelerated our plans by a
year and now expect to complete the full programme of GBP140m of
cumulative savings by FY 2021.
Finally, we made strong progress against our Responsibility
agenda including launching a Regeneration Fund to support a
portfolio of carbon insetting projects to directly tackle the
environmental impact of Burberry's own operations. The new
insetting projects will be implemented within our supply chain,
working at farm level to promote biodiversity, facilitate the
restoration of ecosystems and support the livelihoods of local
producers as well as storing carbon at source and removing it from
the atmosphere. We also worked directly with cotton growers in the
US to develop a fully traceable organic cotton supply for the
future and rolled out dedicated sustainability labelling across all
key-product categories. In addition, we continued to support
communities internationally, through the Burberry Foundation, by
expanding Burberry Inspire, a platform bringing together schools
and creative organisations to allow students to explore the
arts.
Impact of COVID-19 on our business
Since late January, our business has been very materially
impacted by the outbreak of COVID-19.
In revenue terms, most of our losses in February were in Asian
markets. At peak, the majority of our stores in Mainland China were
closed and those that remained open operated with reduced hours
amid very significant declines in footfall. Towards the end of the
year, trading in Mainland China started to improve with the
reopening of all our stores. However, footfall in other parts of
Asia, including Hong Kong S.A.R, remained materially weaker
throughout.
EMEIA and the Americas also suffered very significant losses in
the last three weeks of the year. By the end of March, in line with
government guidelines, all of our stores in these regions were
closed with only the digital part of our business open for
trading.
We also saw disruption across our supply chain. Our
leather-goods centre of excellence, Burberry Manifattura, and our
trench coat factory in Castleford, Yorkshire closed in March. We
also shut our major global distribution centre in Italy in March,
with our American and UK logistics hubs reducing hours but
remaining open to service our digital business. We also re-shaped
our supply chain to enable a continued service to those parts of
the world that remained open.
In order to limit the impact of the outbreak on our business, we
implemented mitigating actions to contain costs and protect our
financial position. These included renegotiating rents, restricting
recruitment, travel and other discretionary spending.
We also leveraged our digital platform to continue to connect
with customers that were unable to visit our stores. This included
bringing our products to our clients through remote selling and
roadshows, live streaming events from stores and creating immersive
experiences such as our recent launch of Bags World.
Throughout, we prioritised the safety and wellbeing of our
employees, partners and customers, following government guidelines
in all our markets. We implemented home working for office-based
teams, and reduced work patterns and shift rotations for teams
whose roles could not be performed remotely, while putting in place
strict protocols for hygiene and social distancing.
At the same time, we looked beyond Burberry to support the
relief efforts continuing Thomas Burberry's legacy of protecting
others and caring for our communities. We are facilitating the
delivery of surgical masks, non-surgical masks and gowns for use by
medical staff and patients. We retooled our factory in Castleford,
Yorkshire to make non-surgical gowns. We are funding research into
a single-dose vaccine developed by the University of Oxford and we
are donating to charities, including FareShare and the Felix
Project, which are dedicated to tackling food poverty across the
UK.
Financial performance
During the year, the increased proportion of new product in our
stores underpinned an improvement in comparable retail store sales
growth to +4% for the first three quarters of the year, despite
headwinds from the considerable disruptions in Hong Kong S.A.R from
August 2019.
Following the end of January 2020, as described above, trading
deteriorated significantly, impacted by store closures, reduced
operating hours and significant footfall declines. As a result, our
Q4 comparable store sales declined 27% and full year comparable
store sales declined -3%. Total revenue including our wholesale and
licensing channels declined -4% at CER.
Group adjusted pro forma operating profit declined 8% in the
year at CER, partially protected by cost mitigation. Reported
operating profit declined 57%, predominantly due to the impact of
adjusting items relating to the COVID-19 pandemic.
We generated free cash flow of GBP66m in the year, below the
prior year level of GBP301m. This predominantly reflected a
reduction in profits, an increase in working capital, a year on
year increase in capital investment of around GBP40m, as guided and
tax payments of GBP150m (2019: GBP111m) primarily reflecting the
accelerated timing of UK tax payments.
As at 28 March 2020, we had cash balances of GBP887m (2019:
GBP837m), which included the cash proceeds from the drawdown of a
GBP300m revolving credit facility (RCF). In terms of leverage, we
had GBP0.5bn of net debt (including lease liabilities), equating to
a net debt (including lease liabilities to EBITDA ratio of 0.7x,
well within our targeted range of 0.5x to 1.0x. Our position is
also well within the RCF covenants. In addition, since the year
end, we have secured funding of GBP300m under the UK Government
sponsored COVID Corporate Financing Facility (CCFF) to mid-March
2021.
FY 2021 outlook
We are not in a position to provide specific guidance for FY
2021 at this stage as it is currently challenging to predict the
course of the pandemic and the longer lasting economic
consequences. However, we currently have 50% of our store network
closed and we expect our first quarter (to end June 2020) to be
severely impacted with store closures likely to be at or near peak
for most of the quarter.
We feel confident in the strength of the Burberry brand and are
encouraged by the recovery we are experiencing in Mainland China
and Korea with cumulative sales in both markets since the beginning
of April ahead of the prior year , albeit it is likely there is a
benefit from some repatriation of spending in Mainland China.
However, as government restrictions ease across the globe,
consumers in different markets are likely to respond in distinct
ways, with the travelling consumer likely to take longer to return.
As a result, it could take some time for the luxury industry to
recover to pre-crisis levels.
Given the current uncertainties, w e have developed a range of
possible recovery scenarios based on scientific, epidemiological
and economic forecasts and we have prepared tailored capital
expenditure and cost mitigation plans for these outcomes. This has
included a comprehensive review of all the components of our cost
base, with savings identified in variable costs, discretionary
spend and property-related expenditure. We have also tiered our
capital expenditure projects by priority.
In addition, we have tightened our management of inventory,
balancing our objective to conserve cash with allowing capacity to
realise sales opportunities as markets recover. Specifically, we
have increased our agility and shortened supply chain lead times,
as well as working in collaboration with our wholesale partners to
control inventory levels.
Embedded into our plans is flexibility to invest in consumer
facing activities to fuel growth when demand increases. This
includes tailoring our approach to individual markets, mirroring
their stages of recovery, and capitalising on our digital platform
to forge stronger connections with our customers.
For the purposes of liquidity, we are aiming to ensure that the
company maintains sufficient funding headroom even in an especially
protracted period of significant store closures. 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, a final dividend has not been declared with
future dividend payments to be reviewed at end of FY 2021 with the
intention of the earliest possible return to our stated progressive
dividend policy.
Our objective is to manage the business efficiently and
flexibly, maintaining control and securing the long term value of
the Burberry brand whilst ensuring we preserve the headroom
required to fuel growth when the market opportunity returns.
R evenue analysis
Revenue by channel
% change
Period ending 28 March 30 March reported CER
GBP million 2020 2019 FX
--------------------------- ---------- ---------- --------- ----
Retail 2,110 2,186 (3) (4)
Comparable retail store
sales (3%) 2%
Wholesale 476 488 (2) (3)
Licensing 47 46 1 1
Revenue 2,633 2,720 (3) (4)
--------------------------- ---------- ---------- ---------
Retail
-- Retail sales -4% at CER, -3% reported
-- Comparable store sales -3% (H1: +4%; H2: -9% with Q3 YTD: +4% and Q4: -27%)
-- Net impact of space on revenue -1%, slightly below guidance
due to the low productivity of new space in the final weeks of the
year
Comparable store sales by region:
Asia Pacific declined by a mid-single digit percentage
-- In the first 9 months Asia Pacific grew by a mid-single digit
percentage with Mainland China up mid-teens and we had a strong
lead up to Lunar New Year. However, from the end of January, sales
were severely impacted by store closures across Mainland China and
materially reduced footfall trends across the region
-- For the full year Mainland China and Korea grew low single
digits, whilst Japan declined low single digits and Hong Kong S.A.R
declined around 40% impacted by the disruptions from August
EMEIA was stable year on year
-- In the first 9 months EMEIA grew by a mid-single digit
percentage and sales in January were strong, up double digits.
However, consumption from travelling customers weakened materially
in February and in the final weeks of the year our sales were
curtailed by store closures
-- For the full year the UK was stable, Continental Europe grew
low single digits and the Middle East declined low single
digits
The Americas declined by a low single digit percentage
-- In the first 9 months, the Americas grew by a low single
digit percentage and the performance in January was stable.
However, February sales were impacted by negative tourist flows and
store closures materially impacted our performance in March
-- For the full year, the US declined low single digits whilst
Canada and Mexico declined double digits
By product ,
-- New product is now around 85% of the mainline store assortment
-- We saw a strong consumer response to the new collections,
delivering double digit growth for the first 9 months
-- Replenishment lines remained softer through the period,
however, we started our work to identify the products that could be
icons of the future and the early consumer response was
positive
-- Accessories benefited from a fuller leather goods assortment
and proved slightly more resilient to the decrease in luxury demand
caused by the COVID-19 outbreak
Store footprint:
The transformation of our directly operated distribution network
is well underway:
-- Store openings included new flagship stores in China World
Beijing, IFC Shanghai and Ginza Tokyo
-- A cumulative 64 stores are now aligned to our new creative
vision, including one in every major city globally
-- 23 of the non-strategic stores previously announced for
closure have now been rationalised with most remaining stores
expected to close in FY 2021
Wholesale
Wholesale revenue declined 3% year on year at CER and declined
2% at reported. In the first 10 months of the year, wholesale
revenue increased 2% with the impact of COVID-19 related
cancelations impacting the performance in February and March.
Growth in luxury wholesale accounts was more than offset by the
rationalisation of non-luxury doors.
By region:
-- Asia Pacific declined by a low double digit percentage
reflecting lower year on year sales to Asian travel retail partners
resulting from a high comparative base as well as COVID-19 related
cancelations
-- EMEIA grew by a low double digit percentage with strong
growth in luxury accounts more than offsetting non luxury door
closures
-- The Americas declined double digits impacted by our strategic
rationalisation of non-luxury doors, which was completed by the end
of the year
Licensing
Licensing revenue was up 1% year on year at CER and reported,
with eyewear performing particularly well in the period.
Operating profit analysis
Adjusted operating profit
Period ended 28 March 30 March % change 28 March % change pro
2020 2019 reported 2020 forma vs March
FX pro forma* 2019
GBP million
--------- ------------
reported CER
FX
--------- --------- ------------ --------- --------
Revenue 2,633 2,720 (3) 2,633 (3) (4)
Cost of sales (859) (859) - (859) -
Gross profit 1,774 1,861 (5) 1,774 (5)
Gross margin % 67.4% 68.4% 67.4%
Operating expenses (1,341) (1,423) (6) (1,370) (4)
Opex as a % of sales 51.0% 52.3% 52.1%
---------------------- --------- --------- ---------- ------------ --------- --------
Adjusted operating
profit 433 438 (1) 404 (8) (8)
Adjusted operating
margin % 16.4% 16.1% +30bps 15.3% (80bps) (70bps)
---------------------- --------- --------- ---------- ------------ --------- --------
* Pro forma is an estimation of the FY 2020 results when
applying the previous accounting standard for leases, IAS 17 Leases
consistent with FY 2019.
Pro forma adjusted operating profit declined 8% and margin
decreased by 70bps at CER.
-- Gross margin excluding adjusting items declined 100bps, ahead
of our guidance as investments in design, product development and
quality were partly offset by lower discount levels
-- Operating expenses excluding adjusting items as a percentage
of sales declined 20bps and overall reduced 4% year on year. This
reflected benefits from the cost saving and the store
rationalisation programmes, as well as the impact of cost
mitigation relating to COVID-19
After a net finance charge of GBP19m (excluding adjusting
items), adjusted profit before tax was GBP414m.
Adjusting items*
Adjusting items amounted to a GBP245m charge (FY 2019: GBP2m
charge) with GBP244m adjusting operating items and GBP1m adjusting
finance items.
The most significant items totalling GBP241m related to asset
impairments resulting from the expected impact of COVID-19 on our
future trading, including store impairments of GBP157m and
inventory provisions of GBP68m.
* For additional details on adjusting items see Appendix and
notes 6 and 7 of the Financial Statements
Taxation
The effective tax rate on adjusted profit reduced 80bps to 22.3%
(2019: 23.1%) reflecting a change in the geographical mix of
profits. The effective tax rate on reported profit is 27.9% (2019:
23.0%) due to the non-recognition of the tax effect on certain
adjusting items. The reported tax charge was GBP47m (2019:
GBP102m).
*For detail see note 9 of the Financial Statements
Cash flow
Represented statement of cash flows
The following table is a representation of the cash flows,
excluding the impact of adjusting items, to highlight the
underlying movements.
Period ended 28 March 30 March
GBP million 2020 2019
Adj operating profit 433 438
Depreciation and amortisation* 331 116
Working capital (130) (45)
Other (9) 7
------------------------------------- --------- ---------
Cash inflow from operations 625 516
Payment of lease liabilities (244) -
Capex net of proceeds on disposal** (146) (110)
Interest* (19) 6
Tax (150) (111)
------------------------------------- --------- ---------
Free cash flow 66 301
------------------------------------- --------- ---------
*Depreciation and amortisation, and interest in FY 2020 includes
the impact of the adoption of IFRS 16
**In FY 2020 capex was GBP149m with proceeds on disposal of
GBP3m
Free cash flow was GBP66m and cash conversion was 52% (2019:
93%) with the outbreak of COVID-19 towards the end of the period
impacting profitability and cash generation. We had the following
key flows:
-- Inventories increased 11% in gross terms, generating an
outflow of GBP41m due to the drop off in Q4 sales relating to the
COVID-19 impact
-- Trade and other receivables resulted in a GBP21m outflow
largely due to an increase in the VAT receivable resulting from the
reduction in Q4 sales
-- Trade and other payables resulting in a GBP68m outflow
relating to the earlier timing of payments to suppliers
-- Capital expenditure GBP149m (2019: GBP110m), in line with guidance
-- Tax paid of GBP150m (2019: GBP111m) reflecting the
accelerated timing of UK tax payments this year resulting from the
new HMRC rules
Cash net of overdrafts at 28 March 2020 was GBP887m (2019:
GBP837m) including an inflow from drawing down the RCF of GBP300m.
During the year, we returned GBP325m to shareholders through a
combination of dividends of GBP175m and a share buyback of GBP150m.
Our net debt including lease liabilities at 28 March was GBP538m
(30 March 2019: lease adjusted net debt GBP409m).
In March 2020, we drew down our revolving credit facility and
since the year end w e have also secured funding of GBP300m under
the UK Government sponsored COVID Corporate Finance Facility (CCFF)
to mid-March 2021. These measures have been taken to protect the
liquidity of the group through the COVID pandemic.
APPIX
Adjusting items
Adjusting items*
Period ending 28 March 30 March
GBP million 2020 2019
----------------------------------------- --------- ---------
The impact of COVID-19
Store impairments (157) -
Stock provisions (68) -
Assets under the course of construction (10) -
impairment
Receivables impairment (11) -
Related other sundry items 5 -
----------------------------------------- --------- ---------
COVID-19 adjusting items** (241) -
Restructuring costs (10) (12)
BME deferred consideration income 2 4
Disposal of beauty business 5 7
----------------------------------------- --------- ---------
Total adjusting operating items (244) (1)
Adjusting financing items (1) (1)
--------- ---------
Adjusting items (245) (2)
----------------------------------------- --------- ---------
*For more details see note 7 of the Financial Statements
** COVID adjusting item includes a GBP68m charge that has been
recognised through COGS relating to inventory provisions
The major adjusting items are as follows:
-- Impact of the COVID-19 pandemic: GBP241m predominantly
related to asset impairments resulting from the expected impact of
the pandemic on our future trading. The adjustment includes the
following charges: store impairments of GBP157m, inventory
provisions of GBP68m, impairment of assets under construction of
GBP10m, receivables provisions of GBP11m. It also includes a GBP5m
credit relating to other sundry items.
-- Restructuring costs: GBP10m related to both our cost and
efficiency programme and our non-strategic store
rationalisation
-- Burberry Middle East (BME) deferred consideration: The GBP2m
income reflects the revaluation of the deferred consideration
balance
-- Disposal of Beauty business: GBP5m income reflecting the
reassessment of the provisions relating to both beauty contract
terminations and beauty trade receivables for the sale of inventory
relating to the disposal
-- Adjusting finance charge: The GBP1m charge relates to the
discount unwind on the deferred consideration for the BME
transaction
Adoption of IFRS 16
The reported results for FY 2020 include the impact of adoption
of IFRS 16 Leases on a modified retrospective basis. As a result,
FY 2019 has not been restated and continued to reflect IAS 17, the
previous standard for leases. A pro forma for FY 2020, setting out
an estimation of the results for FY 2020 when applying IAS 17, is
included on page 47. The difference between reported adjusted PBT
and proforma adjusted PBT is GBP4m. The charge to equity, in the FY
2020 results, on adoption of IFRS 16 is now GBP57m, compared to
GBP87m including in the Interim Results for H1 2020. The Interim
Report for H1 2021 will include an update to the comparative period
to reflect the amount recorded in FY 2020.
Retail/wholesale revenue by destination*
% change
Period ending 28 March 30 March reported CER
GBP million 2020 2019 FX
----------------------------- --------- --------- --------- -----
Asia Pacific (c.90% retail) 1,041 1,104 (6) (6)
EMEIA (75% retail) 960 958 - 1
Americas (80% retail) 585 612 (4) (7)
Total retail/wholesale
revenue 2,586 2,674 (3) (4)
----------------------------- --------- --------- ---------
Retail/wholesale revenue by product division*
% change
GBP million 28 March 30 March reported CER
Period ending 2020 2019 FX
--------------------------- ---------- ---------- --------- ----
Accessories 948 1,013 (6) (7)
Women's 796 837 (5) (5)
Men's 715 698 2 2
Children's, Beauty and
other 127 126 1 1
Total retail/wholesale
revenue 2,586 2,674 (3) (4)
--------------------------- ---------- ---------- ---------
Store portfolio*
Directly-operated stores
--------------------------------------- ----------
Stores Concessions Outlets Total Franchise
stores
-------------------- ------- ------------ -------- ----------
At 30 March 2019 233 146 52 431 44
Additions 19 15 5 39 1
Closures (34) (12) (3) (49) (1)
At 28 March 2020 218 149 54 421 44
------- ------------ --------
*Excludes the impact of pop up stores
Store portfolio by region*
Directly-operated stores
--------------------------------------- ----------
Stores Concessions Outlets Total Franchise
At 28 March 2020 stores
-------------------- ------- ------------ -------- ----------
Asia Pacific 92 89 18 199 7
EMEIA 61 51 19 131 37
Americas 65 9 17 91 -
Total 218 149 54 421 44
------- ------------ --------
*Excludes the impact of pop up stores
Adjusted operating
profit % change pro
Period ended forma vs March
2019
GBP million
--------- --------- -----------
% change 28 March reported CER
28 March 30 March reported 2020 FX
2020 2019 FX Pro forma
--------- --------- ----------- ------------ -----
Retail/wholesale 390 396 (2) 361 (9) (9)
Licensing 43 42 2 43 2 2
-------------------- --------- --------- ---------- ----------- ------------ -----
Adjusted operating
profit 433 438 (1) 404 (8) (8)
Adjusted operating
margin 16.4% 16.1% 15.3%
-------------------- --------- --------- ---------- ----------- ------------ -----
Exchange rates
Spot rates Average effective exchange
rates
1 May FY 2020 FY 2019
GBP1= 2020
----------------------- ----------- -------------- -------------
Euro 1.15 1.14 1.13
US Dollar 1.26 1.27 1.31
Chinese Yuan Renminbi 8.90 8.88 8.82
Hong Kong Dollar 9.76 9.89 10.26
Korean Won 1,529 1,504 1,460
----------------------- ----------- -------------- -------------
Profit before tax reconciliation
Period ended 28 March 30 March % change 28 March % change pro
2020 2019 Reported 2020 forma vs March
GBP million FX pro forma 2019
---------------------------------- --------- --------- ---------- -----------
reported CER
FX
---------------------------------- --------- --------- ---------- ----------- ------------ ----
Adjusted profit
before tax 414 443 (7) 410 (7) (7)
Adjusting items*
COVID-19 related
items (241) - (241)
Restructuring costs (10) (12) (10)
BME deferred consideration
liability 2 4 2
Disposal of Beauty
operations 5 7 5
Adjusting financing
items (1) (1) (1)
---------------------------------- --------- --------- ---------- ----------- ------------ ----
Profit before tax 169 441 (62) 165 (63)
---------------------------------- --------- --------- ---------- ----------- ------------ ----
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
Pro forma This measure is an estimation Reported results for the same
results of the results for the period period
when applying the previous This is set out on page 47
accounting standard for
leases, IAS 17 Leases. It
has been included as IFRS
16 was adopted without restatement
of the prior period.
------------------------------------ --------------------------------------------
Constant This measure removes the Results at reported rates
Exchange effect of changes in exchange
Rates rates compared to the prior
(CER) 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 28 March 30 March
over equivalent time periods YoY% 2020 2019
and measured at constant ------------------ --------- ---------
foreign exchange rates. Comparable sales (3%) 2%
It also includes online Change in space (1%) (1%)
sales. This measure is used FX 1% (1%)
to strip out the impact ------------------ --------- ---------
of permanent store openings Retail revenue (3%) 0%
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 business. income statement on page 15. The
These measures remove the Group's accounting policy for
impact of those items which adjusted profit before tax is
should be excluded to provide set out in note 3 to the financial
a consistent and comparable statements.
view of performance.
------------------------------------ --------------------------------------------
Free Cash Free cash flow is defined Net cash generated from operating
Flow as net cash generated from activities:
operating activities less Period ended 28 March 30 March
capital expenditure plus GBPm 2020 2019
cash inflows from disposal --------------------- --------- ---------
of fixed assets and including Net cash generated
cash outflows for lease from operating
principal payments and other activities 456 411
lease related items following Capital expenditure (149) (110)
the adoption of IFRS 16 Lease outflows (244) -
in this period. Other items 3 -
--------------------- --------- ---------
Free cash flow 66 301
Cash Conversion Cash conversion is defined Period ended 28 March 30 March
as free cash flow pre tax/adjusted GBPm 2020 2019
profit before tax. It provides ----------------- --------- ---------
a measure of the Group's Cash conversion 52% 93%
effectiveness in converting
its profit into cash.
------------------------------------ -----------------------------------------------
Net Debt Net debt is defined as the Cash:
lease liability recognised Period ended 28 March 30 March
on the balance sheet plus GBPm 2020 2019
borrowings less cash net ------------------ --------- ---------
of overdrafts. Cash 887 837
*Prior to the adoption of Lease liability/
IFRS 16, lease adjusted Operating lease
net debt was defined as debt (1,125) (1,246)
five times minimum lease Borrowings (300) -
payments, adjusted for charges ------------------ --------- ---------
and utilisation of onerous Net debt (538) (409)*
lease provisions, less cash
net of overdrafts.
------------------------------------ -----------------------------------------------
GROUP INCOME STATEMENT
52 weeks
to 52 weeks
28 March to 30 March
2020 2019
Note GBPm GBPm
--------------------------------------------------- ---- --------- ------------
Revenue 4 2,633.1 2,720.2
Cost of sales (927.6) (859.4)
--------------------------------------------------- ---- --------- ------------
Gross profit 1,705.5 1,860.8
Net operating expenses 5 (1,516.8) (1,423.6)
--------------------------------------------------- ---- --------- ------------
Operating profit 188.7 437.2
Financing
--------------------------------------------------- ---- --------- ------------
Finance income 7.6 8.7
Finance expense (26.6) (3.6)
Other financing charge (1.2) (1.7)
--------------------------------------------------- ---- --------- ------------
Net finance (expense)/income 8 (20.2) 3.4
--------------------------------------------------- ---- --------- ------------
Profit before taxation 6 168.5 440.6
Taxation 9 (46.9) (101.5)
--------------------------------------------------- ---- --------- ------------
Profit for the year 121.6 339.1
--------------------------------------------------- ---- --------- ------------
Attributable to:
Owners of the Company 121.7 339.3
Non-controlling interest (0.1) (0.2)
--------------------------------------------------- ---- --------- ------------
Profit for the year 121.6 339.1
--------------------------------------------------- ---- --------- ------------
Earnings per share
Basic 10 29.8p 82.3p
Diluted 10 29.8p 81.7p
--------------------------------------------------- ---- --------- ------------
GBPm GBPm
Reconciliation of adjusted profit before taxation:
Profit before taxation 168.5 440.6
Adjusting operating items:
Cost of sales 6 68.3 -
Net operating expenses 6 176.1 0.9
Adjusting financing items 6 1.2 1.7
--------------------------------------------------- ---- --------- ------------
Adjusted profit before taxation - non-GAAP
measure 414.1 443.2
--------------------------------------------------- ---- --------- ------------
Adjusted earnings per share - non-GAAP measure
Basic 10 78.9p 82.7p
Diluted 10 78.7p 82.1p
--------------------------------------------------- ---- --------- ------------
Dividends per share
Interim 11 11.3p 11.0p
Proposed final (not recognised as a liability
at 28 March/30 March) 11 - 31.5p
--------------------------------------------------- ---- --------- ------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
52 weeks
to 52 weeks
28 March to 30 March
2020 2019
Note GBPm GBPm
--------------------------------------------- ---- --------- ------------
Profit for the year 121.6 339.1
Other comprehensive income1:
Cash flow hedges 23 2.7 (2.1)
Net investment hedges 23 (1.2) 1.6
Foreign currency translation differences 18.5 14.6
Tax on other comprehensive income:
Cash flow hedges 9 (0.5) 0.4
Net investment hedges 9 0.2 (0.2)
Foreign currency translation differences 9 (0.9) (1.3)
--------------------------------------------- ---- --------- ------------
Other comprehensive income for the year, net
of tax 18.8 13.0
--------------------------------------------- ---- --------- ------------
Total comprehensive income for the year 140.4 352.1
--------------------------------------------- ---- --------- ------------
Total comprehensive income attributable to:
Owners of the Company 140.4 352.0
Non-controlling interest - 0.1
--------------------------------------------- ---- --------- ------------
140.4 352.1
--------------------------------------------- ---- --------- ------------
1. All items included in other comprehensive income may
subsequently be reclassified to profit and loss in a future
period.
GROUP BALANCE SHEET
As at As at
28 March 30 March
2020 2019
Note GBPm GBPm
--------------------------------------------- ---- --------- ---------
ASSETS
Non-current assets
Intangible assets 12 247.0 221.0
Property, plant and equipment 13 294.9 306.9
Right-of-use assets 14 834.0 -
Investment properties 2.5 2.5
Deferred tax assets 171.5 123.1
Trade and other receivables 15 53.7 70.1
1,603.6 723.6
--------------------------------------------- ---- --------- ---------
Current assets
Inventories 16 450.5 465.1
Trade and other receivables 15 252.1 251.1
Derivative financial assets 6.7 3.0
Income tax receivables 50.4 14.9
Cash and cash equivalents 17 928.9 874.5
--------------------------------------------- ---- --------- ---------
1,688.6 1,608.6
--------------------------------------------- ---- --------- ---------
Total assets 3,292.2 2,332.2
--------------------------------------------- ---- --------- ---------
LIABILITIES
Non-current liabilities
Trade and other payables 18 (102.3) (176.5)
Lease liabilities 19 (910.0) -
Borrowings 22 (300.0) -
Deferred tax liabilities (0.1) (3.4)
Derivative financial liabilities - (0.1)
Retirement benefit obligations (1.9) (1.4)
Provisions for other liabilities and charges 20 (28.6) (50.7)
--------------------------------------------- ---- --------- ---------
(1,342.9) (232.1)
--------------------------------------------- ---- --------- ---------
Current liabilities
Bank overdrafts 21 (41.6) (37.2)
Lease liabilities 19 (215.5) -
Derivative financial liabilities (4.8) (5.5)
Trade and other payables 18 (447.5) (525.7)
Provisions for other liabilities and charges 20 (13.2) (34.6)
Income tax liabilities (7.9) (37.1)
--------------------------------------------- ---- --------- ---------
(730.5) (640.1)
--------------------------------------------- ---- --------- ---------
Total liabilities (2,073.4) (872.2)
--------------------------------------------- ---- --------- ---------
Net assets 1,218.8 1,460.0
--------------------------------------------- ---- --------- ---------
EQUITY
Capital and reserves attributable to owners
of the Company
Ordinary share capital 23 0.2 0.2
Share premium account 220.8 216.9
Capital reserve 23 41.1 41.1
Hedging reserve 23 4.7 3.5
Foreign currency translation reserve 23 245.2 227.7
Retained earnings 702.2 965.6
--------------------------------------------- ---- --------- ---------
Equity attributable to owners of the Company 1,214.2 1,455.0
Non-controlling interest in equity 4.6 5.0
--------------------------------------------- ---- --------- ---------
Total equity 1,218.8 1,460.0
--------------------------------------------- ---- --------- ---------
GROUP STATEMENT OF CHANGES IN EQUITY
Attributable to owners
of the Company
-----------------------------
Ordinary Share
share premium Other Retained Non-controlling Total
capital account reserves earnings Total interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Balance as at 31 March 2018 0.2 214.6 259.6 946.1 1,420.5 4.9 1,425.4
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Adjustment on initial
application
of IFRS 9 - - - (0.2) (0.2) - (0.2)
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Adjusted balance as at 1
April 2018 0.2 214.6 259.6 945.9 1,420.3 4.9 1,425.2
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Profit for the year - - - 339.3 339.3 (0.2) 339.1
Other comprehensive income:
Cash flow hedges 23 - - (2.1) - (2.1) - (2.1)
Net investment hedges 23 - - 1.6 - 1.6 - 1.6
Foreign currency translation
differences 23 - - 14.3 - 14.3 0.3 14.6
Tax on other comprehensive
income 23 - - (1.1) - (1.1) - (1.1)
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive income
for the year - - 12.7 339.3 352.0 0.1 352.1
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Transactions with owners:
Employee share incentive
schemes
Value of share options
granted - - - 15.7 15.7 - 15.7
Value of share options
transferred
to liabilities - - - (2.5) (2.5) - (2.5)
Tax on share options
granted - - - 1.8 1.8 - 1.8
Exercise of share options - 2.3 - - 2.3 - 2.3
Purchase of own shares
Share buy-back - - - (150.7) (150.7) - (150.7)
Held by ESOP trusts - - - (12.8) (12.8) - (12.8)
Dividends paid in the year - - - (171.1) (171.1) - (171.1)
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
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 16 1 - - - (57.1) (57.1) (0.4) (57.5)
Adjustment on initial
application
of IFRIC 23 1 - - - (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 year - - - 121.7 121.7 (0.1) 121.6
Other comprehensive income:
Cash flow hedges 23 - - 2.7 - 2.7 - 2.7
Net investment hedges 23 - - (1.2) - (1.2) - (1.2)
Foreign currency translation
differences 23 - - 18.4 - 18.4 0.1 18.5
Tax on other comprehensive
income 23 - - (1.2) - (1.2) - (1.2)
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive income
for the year - - 18.7 121.7 140.4 - 140.4
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Transactions with owners:
Employee share incentive
schemes
Value of share options
granted - - - 2.8 2.8 - 2.8
Value of share options
transferred
to liabilities - - - 0.1 0.1 - 0.1
Tax on share options
granted - - - (0.6) (0.6) - (0.6)
Exercise of share options - 3.9 - - 3.9 - 3.9
Purchase of own shares
Share buy-back - - - (150.7) (150.7) - (150.7)
Dividends paid in the year - - - (175.2) (175.2) - (175.2)
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
Balance as at 28 March 2020 0.2 220.8 291.0 702.2 1,214.2 4.6 1,218.8
----------------------------- ---- -------- -------- --------- --------- ------- --------------- -------
GROUP STATEMENT OF CASH FLOWS
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Note GBPm GBPm
----------------------------------------------------- ---- --------- ---------
Cash flows from operating activities
Operating profit 188.7 437.2
Amortisation of intangible assets 12 26.4 28.6
Depreciation of property, plant and equipment 13 83.3 87.2
Depreciation of right-of-use assets 14 221.1 -
Net impairment charge of intangible assets 12 11.6 3.9
Net impairment charge of property, plant and
equipment 13 26.4 7.9
Net impairment charge of right-of-use assets 14 140.3 -
Loss on disposal of property, plant and equipment
and intangible assets 0.7 1.2
Gain on disposal of right-of-use assets (2.1) -
Gain on disposal of Beauty operations (5.0) (6.9)
Gain on derivative instruments (3.1) (2.4)
Charge in respect of employee share incentive
schemes 2.8 15.7
Receipt from settlement of equity swap contracts 0.2 2.5
Decrease/(increase) in inventories 27.4 (59.3)
Increase in receivables (9.8) (54.6)
(Decrease)/increase in payables and provisions (84.0) 54.9
----------------------------------------------------- ---- --------- ---------
Cash generated from operating activities 624.9 515.9
Interest received 7.2 8.1
Interest paid (26.0) (1.8)
Taxation paid (150.3) (110.8)
----------------------------------------------------- ---- --------- ---------
Net cash generated from operating activities 455.8 411.4
Cash flows from investing activities
Purchase of property, plant and equipment (85.3) (62.6)
Purchase of intangible assets (63.5) (48.0)
Proceeds from sale of property, plant and equipment 3.0 -
Initial direct costs of right-of-use assets (5.6) -
Proceeds from disposal of Beauty operations,
net of cash costs paid - 0.6
Acquisition of subsidiary - (14.5)
----------------------------------------------------- ---- --------- ---------
Net cash outflow from investing activities (151.4) (124.5)
Cash flows from financing activities
Dividends paid in the year 11 (175.2) (171.1)
Payment to non-controlling interest 18 (2.7) (11.1)
Proceeds from borrowings 22 300.0 -
Payment of lease principal (228.4) -
Payment on termination of lease (9.7) -
Issue of ordinary share capital 3.8 2.3
Purchase of own shares through share buy-back 23 (150.7) (150.7)
Purchase of own shares by ESOP trusts - (12.8)
----------------------------------------------------- ---- --------- ---------
Net cash outflow from financing activities (262.9) (343.4)
Net increase/(decrease) in cash and cash equivalents 41.5 (56.5)
Effect of exchange rate changes 8.5 1.7
Cash and cash equivalents at beginning of year 837.3 892.1
----------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at end of year 887.3 837.3
----------------------------------------------------- ---- --------- ---------
As at As at
28 March 30 March
2020 2019
Note GBPm GBPm
--------------------------------------------- ---- --------- ---------
Cash and cash equivalents as per the Balance
Sheet 17 928.9 874.5
Bank overdrafts 21 (41.6) (37.2)
--------------------------------------------- ---- --------- ---------
Net cash 887.3 837.3
--------------------------------------------- ---- --------- ---------
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The financial information contained within this report has been
prepared in accordance with the European Union endorsed
International Financial Reporting Standards (IFRSs), IFRS
Interpretations Committee (IFRS IC) interpretations and parts of
the Companies Act 2006 applicable to companies reporting under
IFRS. This financial information does not constitute the Burberry
Group's (the Group) Annual Report and Accounts within the meaning
of Section 435 of the Companies Act 2006.
Statutory accounts for the 52 weeks to 30 March 2019 have been
filed with the Registrar of Companies, and those for 2020 will be
delivered in due course. The reports of the auditors on those
statutory accounts for the 52 weeks to 30 March 2019 and 28 March
2020 were unqualified, did not contain an emphasis of matter
paragraph and did not contain a statement under either section
400(2) or section 498(3) of the Companies Act 2006.
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 uncertainty. The ultimate impact of this
pandemic on the Group is uncertain at the date of signing these
financial statements. The Directors have assessed the potential
cash generation of the Group against a range of projected scenarios
(including a severe but plausible outcome), the liquidity of the
Group, existing funding available to the Group and mitigating
actions which may be taken to reduce discretionary and other
operating cash outflows. On the basis of these assessments the
Directors consider it appropriate to continue to adopt the going
concern basis in preparing the financial statements for the 52
weeks to 28 March 2020.
The principal accounting policies applied in the preparation of
the consolidated financial statements are consistent with those set
out in the statutory accounts for the 52 weeks to 30 March 2019,
with the exception of the following:
New Standards adopted in the period
The following standards were adopted for the first time in the
financial statements for the 52 weeks to 28 March 2020:
IFRS 16 Leases
The Group adopted IFRS 16 Leases, for the period commencing 31
March 2019. This standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases for
both lessees and lessors. It replaces IAS 17 Leases and IFRIC 4
Determining whether an arrangement contains a lease.
The Group has adopted IFRS 16 using a modified retrospective
approach. Under this approach, the Group has opted to measure the
initial right-of-use assets at an amount equal to the lease
liabilities on the date of adoption. The lease liabilities are
measured as the present value of future lease payments. The
right-of-use assets are adjusted to take account of any prepaid
lease payments and incentives relating to the relevant leases that
are recorded on the balance sheet at 30 March 2019.
The Group has released any onerous lease provisions which had
previously been recognised against off balance sheet onerous lease
contracts. An impairment analysis of the related right-of-use asset
recognised at 31 March 2019 has been performed and the resulting
impairments recognised. The difference between the release of
onerous lease provisions previously recognised and impairments
recognised against related right-of-use assets has been recognised
against opening reserves as at 31 March 2019.
The impact of the adoption of IFRS 16 on the balance sheet as at
31 March 2019 is set out in the table on page 21.
There has been no restatement of comparative information in the
financial statements as a result of adopting IFRS 16 under the
modified retrospective approach.
For contracts in place at this date of adoption, the Group
continued to apply its existing definition of leases under the
previous standards, IAS 17 and IFRIC 4, instead of reassessing
whether existing contracts were or contained a lease at the date of
application of the new standard.
The Group is using the following practical expedients on
transition to leases previously classified as operating leases:
electing to not apply the retrospective treatment to leases for
which the term ends within 12 months of initial application,
electing to apply a single discount rate to portfolios of leases
with similar characteristics, excluding initial direct costs from
the initial measurement of the right-of-use assets, and using
hindsight in determining the lease term where the contract contains
options to extend or terminate the lease.
1. Basis of preparation (continued)
New Standards adopted in the period (continued)
Adjustments recognised on adoption of IFRS 16
The change in accounting policy affected the following line
items in the balance sheet at 31 March 2019:
As at 31
March 2019
GBPm Description of change
-------------------------------- ----------- -----------------------------------------------
Reclassification of assets held under
finance leases from Property, plant
Property, plant and equipment (0.7) and equipment to Right-of-use assets
-------------------------------- ----------- -----------------------------------------------
Initial right-of-use assets recognised
on adoption of IFRS 16, net of impairments
Right-of-use assets 878.1 recognised on adoption
-------------------------------- ----------- -----------------------------------------------
Net impact of deferred tax arising
on the difference between the initial
impairment of right-of-use assets recognised
on adoption, compared to the onerous
Deferred tax assets 16.4 lease provisions previously recognised
-------------------------------- ----------- -----------------------------------------------
Reclassification of prepayments, relating
to leases recognised on balance sheet
on adoption of IFRS 16, to form part
Trade and other receivables (37.5) of the initial right-of-use assets
-------------------------------- ----------- -----------------------------------------------
Reclassification of accruals and deferred
income, relating to leases recognised
on balance sheet on adoption of IFRS
16, to form part of the initial right-of-use
Trade and other payables 83.2 assets
-------------------------------- ----------- -----------------------------------------------
Release of onerous lease provisions
Provisions for other liabilities previously recognised against off balance
and charges 48.0 sheet onerous lease contracts
-------------------------------- ----------- -----------------------------------------------
Net present value of lease liabilities
Lease liabilities (1,045.0) recognised on adoption of IFRS 16
-------------------------------- ----------- -----------------------------------------------
Post-tax net impact of the difference
between the initial impairment of right-of-use
assets recognised on adoption, compared
to the onerous lease provisions previously
recognised, which is recorded in reserves
Reserves 57.5 on adoption
-------------------------------- ----------- -----------------------------------------------
The net impact on retained earnings at 31 March 2019 was a
decrease of GBP57.5 million. This arose as a result of an initial
impairment of right-of-use assets of GBP121.9 million, offset by a
reversal in the previous onerous lease provisions relating to the
same leases of GBP48.0 million and the recognition of a net
increase in deferred tax assets of GBP16.4 million. This impairment
arose principally as a result of measurement differences between
provisioning under IAS 36 compared with IAS 37. The weighted
average incremental borrowing rate applied to the lease liabilities
on 31 March 2019 was 2.3%.
Key judgements made in calculating the initial impact of
adoption include determining the lease term where extension or
termination options exist. In such instances, all facts and
circumstances that may create an economic incentive to exercise an
extension option, or not exercise a termination option, have been
considered to determine the lease term. Considerations include, but
are not limited to, the period assessed by management when
approving initial investment, together with costs associated with
any termination options or extension options. Extension periods (or
periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated). Where the lease term has been extended by assuming an
extension option will be recognised, this will result in the
initial right-of-use assets and lease liabilities on adoption of
IFRS 16 Leases being greater than if the option was not assumed to
be exercised. Likewise, assuming a break option will be exercised
will reduce the initial right-of-use assets and lease
liabilities.
Judgement is required in determining the discount rate, which is
based on the incremental borrowing rate. As the Group has not held
any borrowings since 2013, at the date of adoption, the judgement
applied required a consideration of the appropriate factors to take
into account when assessing the incremental borrowing rate of the
Group and its subsidiaries. An increase in the discount rate would
result in a lower value of the initial right-of-use asset and lease
liability, lower depreciation expense and higher interest expense
over the term of the lease. The impact of recognising lease
payments in excess of the minimum lease payments on adoption was
GBP262.6 million.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under IAS 17 Leases. The impact of discounting
on the initial value of the lease liability recognised on adoption
was GBP113.5 million.
1. Basis of preparation (continued)
New Standards adopted in the period (continued)
Adjustments recognised on adoption of IFRS 16 (continued)
The most significant differences between the Group's operating
lease commitments of GBP940.5 million at 30 March 2019 and lease
liabilities upon adoption of IFRS 16 of GBP1,045.0 million are set
out below:
GBPm
--------------------------------------------------------------- -------
Operating lease commitments reported at 30 March 2019 under
IAS 17 940.5
Exclude/deduct:
Commitments relating to assets not yet controlled by the
Group (82.4)
Include/add:
Liabilities in excess of the minimum commitment to the end
of the lease term 262.5
Reclassification of finance lease liabilities 0.7
Restatement for commitments excluded at 30 March 2019 37.2
--------------------------------------------------------------- -------
Subtotal 1,158.5
Effect of discounting on payments including in the calculation
of the lease liability (113.5)
Lease liability opening balance as at 31 March 2019 under
IFRS 16 1,045.0
--------------------------------------------------------------- -------
Of which are:
Current lease liabilities 207.8
Non-current lease liabilities 837.2
--------------------------------------------------------------- -------
1,045.0
--------------------------------------------------------------- -------
The commitments under IAS 17 for all operating leases as at 30
March 2019 were as follows:
As at
30 March
2019
GBPm
---------------------- ---------
Amounts falling due:
Within 1 year 230.2
Between 2 and 5 years 460.2
After 5 years 287.3
----------------------- ---------
Total 977.7
----------------------- ---------
The commitments above are future minimum lease payments for
periods up to the date of the Group's first available termination
option. The financial commitments for operating lease amounts
calculated as a percentage of revenue ('revenue leases') have been
based on the minimum payment that is required under the terms of
the relevant lease excluding any contingent payments.
The Group's activities as a lessor are not material and there is
not a significant impact on the financial statements on adoption of
IFRS 16.
Accounting policy for leases
The Group's new accounting policy for leases, together with the
previous policy, are set out below.
The Group is both a lessee and lessor of property, plant and
equipment. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. An identified asset
may be specifically or implicitly specified. Control exists when
the lessee has both the right to direct the use of the identified
asset and the right to obtain substantially all of the economic
benefits from that use.
1. Basis of preparation (continued)
New Standards adopted in the period (continued)
Accounting policy for leases (continued)
Lessee accounting
The Group's principal lease arrangements where the Group acts as
the lessee are for property, most notably the lease of retail
stores, corporate offices and warehouses. Other leases are for
office equipment, vehicles, and supply chain equipment. Lease terms
are negotiated on an individual basis and contain a wide range of
different terms and conditions.
The Group recognises all lease liabilities and the corresponding
right-of-use assets on the balance sheet, with the exception of
certain short-term leases (12 months or less) and leases of low
value assets, which are expensed as incurred. Leases and the
corresponding right-of-use assets are initially recognised when the
Group obtains control of the underlying asset. Leases for new
assets are presented as additions to lease liabilities and
right-of-use assets.
Lease liabilities are initially measured on a present value
basis. Lease liabilities include the net present value of the
following lease payments:
-- Fixed payments, less any incentives;
-- Variable lease payments that are based on a future index or
rate;
-- Amounts expected to be payable by the lessee under residual
value guarantees; and,
-- The cost of exercise of a purchase option if the lessee is
reasonably certain to exercise that option.
Where the lease contains an extension option or a termination
option which is exercisable by the Group, as lessee, an assessment
is made as to whether the Group is reasonably certain to exercise
the extension option, or not exercise the termination option,
considering all relevant facts and circumstances that create an
economic incentive. Considerations may include the contractual
terms and conditions for the optional periods compared to market
rates, costs associated with the termination of the lease and the
importance of the underlying asset to the Group's operations.
Variable lease payments dependent upon a future index or rate
are measured using the amounts payable at the commencement date
until the index or rate is known. Variable lease payments not
dependent on an index or rate are excluded from the calculation of
lease liabilities.
Payments are discounted at the incremental borrowing rate of the
lessee, unless the interest rate implicit in the lease can be
readily determined.
Right-of-use assets are classified as property or non-property.
The Group has elected not to apply the short-term exemption to the
property class of right-of-use assets. Where the exemption is
applied to the non-property class of right-of-use assets, lease
payments are expensed as incurred. The low value asset exemption
has been applied to both the property and non-property class of
assets on a lease-by-lease basis where applicable.
In circumstances where the Group is in possession of a property
but there is no executed agreement or other binding obligation in
relation to the property, rent is expensed until such time the
obligation becomes binding, at which point, a right-of-use asset
and lease liability will be recognised prospectively. These lease
costs are disclosed as lease in holdover expenses. Refer to notes 5
and 21.
Right-of-use assets are measured at cost comprising the
following:
-- The amount of the initial measurement of the lease
liability;
-- Any lease payments made at or before the commencement date
less any lease incentives received; and,
-- Any initial direct costs incurred in entering into the
lease.
The Group recognises depreciation of right-of-use assets and
interest on lease liabilities in the income statement over the
lease term. Repayments of lease liabilities are classified
separately in the cash flow statement where the cash payments for
the principal portion of the lease liability are presented within
financing activities, and cash payments for the interest portion
are presented within operating activities. Payments in relation to
short-term leases and leases of low value assets which are not
included on the balance sheet are included within operating
activities.
Modifications to lease agreements, extensions to existing lease
agreements and changes to future lease payments relating to
existing terms in the contract, including market rent reassessments
and index based changes, are presented as remeasurements of the
lease liabilities. The related right-of-use asset is also
remeasured. If the modification results in a reduction in scope of
the lease, either through shortening the lease term or through
disposing of part of the underlying asset, a gain or loss on
disposal may arise relating to the difference between the lease
liabilities and the right-of-use asset applicable to the reduction
in scope.
Right-of-use assets are included in the review for impairment of
property, plant and equipment and intangible assets with finite
economic lives, if there is an indication that the carrying amount
of the cash generating unit may not be recoverable.
1. Basis of preparation (continued)
New Standards adopted in the period (continued)
Accounting policy for leases (continued)
Lessor accounting
The Group also acts as a lessor of properties. Each of these
leases are classified as either a finance lease or an operating
lease. Leases in which substantially all of the risks and rewards
incidental to ownership of an underlying asset are transferred to
the lessee by the lessor are classified as finance leases. Leases
which are not finance leases are classified as operating
leases.
Gross rental income in respect of operating leases is recognised
on a straight-line basis over the term of the leases.
Leases accounting policy applied in the comparative period
The Group is both a lessor and lessee of property, plant and
equipment. Determining whether an arrangement is or contains a
lease is based on the substance of the arrangement. Leases in which
substantially all of the risks and rewards incidental to ownership
of an asset are transferred to the lessee by the lessor are
classified as finance leases. Leases which are not finance leases
are classified as operating leases.
Gross rental expenditure/income in respect of operating leases
is recognised on a straight-line basis over the term of the leases.
Certain rental expenses are determined on the basis of revenue
achieved in specific retail locations and are accrued for on that
basis.
Amounts paid to/received from the landlord to acquire or
transfer the rights to a lease are treated as prepayments/deferred
income. Lease incentives, typically rent-free periods and capital
contributions, are held on the Balance Sheet in deferred income and
non-financial accruals and recognised over the term of the
lease.
IFRIC 23 Uncertainty over Income Tax Treatments
The Group adopted IFRIC 23 Uncertainty over Income Tax
Treatments, for the period commencing 31 March 2019. This
interpretation clarifies the accounting for uncertainties in income
tax positions. IFRIC 23 requires the Group to measure the effect of
uncertainty on income tax positions using either the most likely
amount or the expected value amount depending on which method is
expected to better reflect the resolution of the uncertainty. The
adoption of IFRIC 23 has resulted in a reduction to retained
earnings at 31 March 2019 of GBP4.4 million.
Standards not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for the 52 weeks to 28 March 2020
and have not been early adopted by the Group. These standards are
not expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future
transactions.
Key sources of estimation uncertainty
Preparation of the consolidated 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 COVID-19 pandemic (COVID-19) has had a major impact on the
global economy and is expected to have a significant impact on the
operations and financial performance of the Group for at least the
next 12 months. At the date of signing these financial statements
many of the Group's retail stores are closed due to government
restrictions relating to COVID-19 and the ultimate impact of
COVID-19 is uncertain.
As a result, management have assessed the assets held by the
Group at 28 March 2020 to identify any indicators of impairment.
Where a potential impairment may have arisen as a result of
COVID-19, an estimate of the expected recoverable value of the
asset has been made and compared to the current carrying value of
the asset, to estimate any impairment to be recorded. These
estimates, where applicable, have been derived from management's
planning assumption of the likely trading performance over the next
two years, taking into account their assumption of the impact of
COVID-19 and reflecting a protracted impact of lockdown, the
resultant store closures, footfall decline across key regions and
gradual improvement in the following year. Longer term growth rates
of mid-single digits have been applied thereafter. Where material,
these significant estimates have been disclosed below and in the
relevant notes to the financial statements.
1. Basis of preparation (continued)
Key sources of estimation uncertainty (continued)
Due to the significant uncertainty regarding the ultimate impact
of COVID-19, the assumptions used in these estimates include an
increased level of inherent uncertainty. As a result, management
have also considered, where applicable, a potential range of
outcomes applying revenue estimates of 15% higher or lower than
those included in the central planning assumption. A range of
sensitivities for the material estimates are also included in the
notes, to indicate the potential range of outcomes considered by
management in forming these estimates.
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 within the next financial year are
discussed below.
Impairment of property, plant and equipment and right-of-use
assets
Property, plant and equipment and right-of-use assets are
reviewed for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. When a
review for impairment is conducted, the recoverable amount of an
asset or a cash generating unit is determined based on value-in-use
calculations prepared using management's best estimates and
assumptions at the time. Refer to notes 13 and 14 for further
details of property, plant and equipment, right-of-use assets and
impairment reviews carried out in the period.
Inventory provisioning
The Group manufactures and sells luxury goods and is subject to
changing consumer demands and fashion trends. The recoverability of
the cost of inventories is assessed every reporting period, by
considering the expected net realisable value of inventory compared
to its carrying value. Where the net realisable value is lower than
the carrying value, a provision is recorded. When calculating
inventory provisions, management considers the nature and condition
of the inventory, as well as applying assumptions in respect of
anticipated saleability of finished goods and future usage of raw
materials. Refer to note 16 for further details of the carrying
value of inventory.
Uncertain tax positions
In common with many multinational companies, Burberry faces tax
audits in jurisdictions around the world in relation to transfer
pricing of goods and services between associated entities within
the Group. These tax audits are often subject to inter-government
negotiations. The matters under discussion are often complex and
can take many years to resolve. Tax liabilities are recorded based
on management's estimate of either the most likely amount or the
expected value amount depending on which method is expected to
better reflect the resolution of the uncertainty. Given the
inherent uncertainty in assessing tax outcomes we could, in future
periods, experience adjustments to these tax liabilities that have
a material positive or negative effect on our results for a
particular period.
During the next year it is possible that some or all of the
current disputes are resolved. Management estimate that the outcome
across all matters under dispute or in negotiation between
governments could be in the range of a decrease of GBP5 million to
an increase of GBP15 million relative to the current tax
liabilities recognised at 28 March 2020. This would have an impact
of approximately 1% to 4% on the Group's effective tax rate.
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 Group financial
statements for the 52 weeks to 28 March 2020 are as follows:
Where the Group is a lessee, judgement is required in
determining the lease term where extension or termination options
exist. In such instances, all facts and circumstances that may
create an economic incentive to exercise an extension option, or
not exercise a termination option, have been considered to
determine the lease term. Considerations include, but are not
limited to, the period assessed by management when approving
initial investment, together with costs associated with any
termination options or extension options. Extension periods (or
periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated). Where the lease term has been extended by assuming an
extension option will be recognised, this will result in the
initial right-of-use assets and lease liabilities at inception of
the lease being greater than if the option was not assumed to be
exercised. Likewise, assuming a break option will be exercised will
reduce the initial right-of-use assets and lease liabilities.
There were no key judgements arising in the prior period.
2. 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 for the month 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 date of the transactions. The assets
and liabilities of such undertakings are translated at the closing
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.
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
----------------------- --------------------
52 weeks 52 weeks
to to 30 March As at As at
28 March 2019 28 March 30 March
2020 2020 2019
---------------------- --------- ------------ --------- ---------
Euro 1.14 1.13 1.12 1.16
US Dollar 1.27 1.31 1.24 1.30
Chinese Yuan Renminbi 8.88 8.82 8.75 8.75
Hong Kong Dollar 9.89 10.26 9.64 10.20
Korean Won 1,504 1,460 1,512 1,478
---------------------- --------- ------------ --------- ---------
3. 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 7 for
further details of adjusting items.
4. 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.
4. Segmental analysis (Continued)
Retail/Wholesale Licensing Total
-------------------- -------------------- --------------------
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
to to to to to to
28 March 30 March 28 March 30 March 28 March 30 March
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- --------- --------- --------- --------- ---------
Retail 2,110.2 2,185.8 - - 2,110.2 2,185.8
Wholesale 475.8 487.9 - - 475.8 487.9
Licensing - - 48.5 48.3 48.5 48.3
------------------------------- --------- --------- --------- --------- --------- ---------
Total segment revenue 2,586.0 2,673.7 48.5 48.3 2,634.5 2,722.0
Inter-segment revenue1 - - (1.4) (1.8) (1.4) (1.8)
------------------------------- --------- --------- --------- --------- --------- ---------
Revenue from external
customers 2,586.0 2,673.7 47.1 46.5 2,633.1 2,720.2
------------------------------- --------- --------- --------- --------- --------- ---------
Depreciation and amortisation 330.8 115.8 - - 330.8 115.8
Impairment of intangible
assets2 1.6 3.9 - - 1.6 3.9
Net impairment of property,
plant and equipment3 (2.0) 7.5 - - (2.0) 7.5
Net impairment of right-of-use
assets4 12.8 - - - 12.8 -
Other non-cash items:
Share-based payments 2.8 15.7 - - 2.8 15.7
------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted operating profit 389.8 395.7 43.3 42.4 433.1 438.1
------------------------------- --------- --------- --------- --------- --------- ---------
Adjusting items5 (245.6) (2.6)
Finance income 7.6 8.7
Finance expense (26.6) (3.6)
------------------------------- --------- --------- --------- --------- --------- ---------
Profit before taxation 168.5 440.6
------------------------------- --------- --------- --------- --------- --------- ---------
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. Impairment of intangible assets for the 52 weeks to 28 March
2020 is presented excluding GBP10.0 million (last year: GBPnil)
relating to charges as a result of the impact of COVID-19, which
has been presented as an adjusting item (refer to note 7).
3. Net impairment charge relating to property, plant and
equipment for the 52 weeks to 28 March 2020 is presented excluding
GBP28.4 million relating to charges as a result of impact of
COVID-19. For the 52 weeks to 30 March 2019, net impairment charges
were presented excluding GBP0.4 million relating to the closure of
stores as part of the Group's restructuring programme. These have
been presented as adjusting items (refer to note 7).
4. Net impairment of right-of-use assets for the 52 weeks to 28
March 2020 is presented excluding GBP128.1 million relating to
charges as a result of the impact of COVID-19 and a credit of
GBP0.6 million relating to restructuring costs, which have been
presented as adjusting items (refer to note 7).
5. Refer to note 7 for details of adjusting items.
Retail/Wholesale Licensing Total
-------------------- -------------------- --------------------
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
to to to to to to
28 March 30 March 28 March 30 March 28 March 30 March
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- --------- --------- --------- ---------
Additions to non-current
assets 447.5 149.8 - - 447.5 149.8
Total segment assets 2,020.9 1,201.6 11.2 9.5 2,032.1 1,211.1
-------------------------- --------- --------- --------- --------- --------- ---------
Goodwill 109.3 108.6
Cash and cash equivalents 928.9 874.5
Taxation 221.9 138.0
-------------------------- --------- --------- --------- --------- --------- ---------
Total assets per Balance
Sheet 3,292.2 2,332.2
-------------------------- --------- --------- --------- --------- --------- ---------
4. Segmental analysis (Continued)
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.
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Revenue by product division GBPm GBPm
---------------------------- --------- ---------
Accessories 947.5 1,012.7
Women's 796.5 836.8
Men's 714.8 698.2
Children's/Other 127.2 126.0
Retail/Wholesale 2,586.0 2,673.7
Licensing 47.1 46.5
---------------------------- --------- ---------
Total 2,633.1 2,720.2
---------------------------- --------- ---------
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Revenue by destination GBPm GBPm
----------------------- --------- ---------
Asia Pacific 1,040.5 1,104.3
EMEIA1 960.6 957.4
Americas 584.9 612.0
Retail/Wholesale 2,586.0 2,673.7
Licensing 47.1 46.5
----------------------- --------- ---------
Total 2,633.1 2,720.2
----------------------- --------- ---------
1. EMEIA comprises Europe, Middle East, India and Africa.
Entity-wide disclosures
Revenue derived from external customers in the UK totalled
GBP319.6 million for the 52 weeks to 28 March 2020 (last year:
GBP311.7 million).
Revenue derived from external customers in foreign countries
totalled GBP2,313.5 million for the 52 weeks to 28 March 2020 (last
year: GBP2,408.5 million). This amount includes GBP491.9 million of
external revenues derived from customers in the USA (last year:
GBP513.6 million) and GBP461.5 million of external revenues derived
from customers in China (last year: GBP450.5 million).
The total of non-current assets other than financial instruments
and deferred tax assets located in the UK is GBP490.8 million (last
year: GBP178.0 million). The remaining GBP894.4 million of
non-current assets are located in other countries (last year:
GBP381.5 million), with GBP232.5 million located in the USA (last
year: GBP125.9 million), GBP113.6 million located in China (last
year: GBP75.6 million), and GBP57.1 million located in Korea (last
year: GBP59.0 million).
5. Net operating expenses
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Note GBPm GBPm
------------------------------- ---- --------- ---------
Selling and distribution costs 841.6 863.8
Administrative expenses 499.1 558.9
Adjusting operating items 7 176.1 0.9
------------------------------- ---- --------- ---------
Net operating expenses 1,516.8 1,423.6
------------------------------- ---- --------- ---------
6. Profit before taxation
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Note GBPm GBPm
-------------------------------------------------- ---- --------- ---------
Adjusted profit before taxation is stated after
charging/(crediting):
Depreciation of property, plant and equipment
Within cost of sales 1.2 1.1
Within selling and distribution costs 68.4 75.8
Within administrative expenses 13.7 10.3
Depreciation of right-of-use assets
Within cost of sales 0.4 -
Within selling and distribution costs 200.6 -
Within administrative expenses 20.1 -
Amortisation of intangible assets
Within selling and distribution costs 1.0 1.5
Within administrative expenses 25.4 27.1
Loss on disposal of property, plant and equipment
and intangible assets 0.7 1.2
Gain on disposal of right-of-use assets (2.1) -
Net impairment (reversal)/charge relating to
property, plant and equipment1 13 (2.0) 7.5
Net impairment of right-of-use assets2 14 12.8 -
Impairment of intangible assets3 12 1.6 3.9
Employee costs4 478.5 508.4
Other lease expense
Property lease variable lease expense 19 96.2 -
Property lease in holdover expense 19 11.2 -
Non-property short-term lease expense 19 9.9 -
Operating lease rentals
Minimum lease payments5 - 247.4
Contingent rents - 107.2
Operating lease income
Income from lease of freehold property (0.7) (0.7)
Net exchange loss/(gain) on revaluation of
monetary assets and liabilities 8.7 (4.5)
Net loss on derivatives - fair value through
profit and loss 3.4 7.7
Receivables net impairment charge/(reversal)(6) 3.2 (4.1)
-------------------------------------------------- ---- --------- ---------
1. Net impairment charge relating to property, plant and
equipment for the 52 weeks to 28 March 2020 is presented excluding
GBP28.4 million relating to charges as a result of impact of
COVID-19. For the 52 weeks to 30 March 2019, net impairment charges
were presented excluding GBP0.4 million relating to the closure of
stores as part of the Group's restructuring programme. These have
been presented as adjusting items (refer to note 7).
2. Impairment of right-of-use assets for the 52 weeks to 28
March 2020 is presented excluding GBP128.1 million relating to
charges as a result of the impact of COVID-19 and a credit of
GBP0.6 million relating to restructuring costs, which have been
presented as adjusting items (refer to note 7).
3. Impairment of intangible assets for the 52 weeks to 28 March
2020 is presented excluding GBP10.0 million (last year: GBPnil)
relating to charges as a result of the impact of COVID-19, which
has been presented as an adjusting item (refer to note 7).
4. Employee costs for the 52 weeks to 28 March 2020 are
presented excluding GBP5.4 million (last year: GBP11.4 million) of
costs arising as a result of the Group's restructuring programme
and a GBP6.2 million credit (last year: GBPnil) related to the
reversal of accrued costs for share-based payments no longer
expected to vest as a result of COVID-19, which have been presented
as an adjusting item (refer to note 7).
5. Minimum lease payments for the 52 weeks to 30 March 2019
included charges for onerous lease provisions of GBP3.6 million and
did not include payments of GBP5.3 million where existing onerous
lease provisions have been utilised. Minimum lease payments for the
52 weeks to 30 March 2019 were presented excluding a credit of
GBP8.9 million for onerous property obligations and a charge GBP4.5
million for store closure costs in connection with the Group's
restructuring programme, which have been presented as adjusting
items (refer to note 7).
6. Receivables net impairment charge for the 52 weeks to 28
March 2020 is presented excluding GBP11.1 million (last year:
GBPnil) relating to charges as a result of the impact of COVID-19,
which has been presented as an adjusting item (refer to note
7).
6. Profit before taxation (CONTINUED)
Adjusting items
Adjusting operating items
Impact of COVID-19:
Impairment of retail cash generating units 7156.5 -
Impairment of inventory 7 68.3 -
Impairment of intangible assets 7 10.0 -
Impairment of receivables 7 11.1 -
Other impacts of COVID-19 7(5.0) -
Other adjusting items:
Gain on disposal of Beauty operations 7(5.0) (6.9)
Restructuring costs 7 10.6 12.2
Revaluation of deferred consideration liability 7(2.1) (4.4)
----------------------------------------------------- ----- -----
Total adjusting operating items 244.4 0.9
----------------------------------------------------- ----- -----
Adjusting financing items
Finance charge on deferred consideration liability 7 1.2 1.7
Total adjusting financing items 1.2 1.7
----------------------------------------------------- ----- -----
7. Adjusting items
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. The financial statements for the 52 weeks to
28 March 2020 include costs 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 as adjusting
items.
Impairment of retail cash generating units
COVID-19 is expected to have a significant impact on the Group's
retail operations in the next 12 months and beyond, with many of
its retail outlets currently closed as a result of government
restrictions in a number of countries worldwide. As a result
management have carried out a review for potential impairment
across the whole retail portfolio. The impairment review compared
the value-in-use of the retail cash generating units, based on
managements' assumptions regarding the likely future trading
performance (taking into account the effect of COVID-19) to the
carrying values at 28 March 2020. Following this review, a 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 has
also been recognised in the year. This charge has been recognised
as an adjusting item arsing as a result of COVID-19, in accordance
with the Group's accounting policy, as it is considered to be
material and one-off in nature. Refer to note 13 for details of
impairment of retail cash generating units.
Impairment of inventory
Management assesses the recoverability of the carrying value of
inventories at every reporting period and, where the expected
recoverable amount is lower than the carrying value, a provision is
recorded. Typically, inventory provisions are recorded against aged
inventory or specific products which have been identified as having
a low expectation of future sale. Due to the impact of COVID-19,
the closure of many of the Group's retail stores worldwide and the
associated build-up of inventory, management have reassessed their
plans for the usage of inventory over the next 12 months, taking
into account the expected length of the shutdown, products ordered
for future seasons and the Group's projected future sales. As a
result of this reassessment, management have identified additional
inventory which is no longer expected to realise its carrying
value. Provisions of GBP68.3 million have been recorded against
this additional inventory, which relates to current and recent
seasons that under more normal circumstances would be expected to
sell through with limited loss. This additional charge for
inventory provisions has been presented as an adjusting items
arising as a result of COVID-19, in accordance with the Group's
accounting policy, as it is considered material and one-off in
nature. A related tax credit of
GBP12.5 million has also been recognised in the year. Refer to
note 16 for details of inventory provisions.
Impairment of intangible assets
Following changes to management investment plans, due to the
impact of COVID-19, an impairment charge of GBP10.0 million has
been recorded in relation to computer software assets under
construction. Due to resulting delay in the development of this
software, management no longer expect to fully utilise the
expenditure incurred to date. This impairment charge has been
presented as an adjusting item arising as a result of COVID-19, in
accordance with the Group's accounting policy, as it is considered
one-off in nature. A related tax credit of GBP1.9 million has also
been recognised in the year. Refer to note 12 for details of
impairment of intangible assets.
7. Adjusting items (Continued)
Impact of COVID-19 (continued)
Impairment of receivables
Due to the global financial uncertainty arising from COVID-19,
management have reassessed and increased the expected loss rates
for trade and other receivables at 28 March 2020. This increase
reflects the greater likelihood of credit default by the Group's
debtors in the next 12 months due to the impact of COVID-19. The
increase in expected loss rates has resulted in a charge of GBP11.1
million for impairment of receivables in the year. The Group has
not incurred significant costs for impairment of receivables in
previous years. This charge of GBP11.1 million has been presented
as an adjusting item arising as a result of COVID-19, in accordance
with the Group's accounting policy, as it is considered to be
one-off in nature. A related tax credit of GBP2.1 million has also
been recognised in the year.
Other impacts of COVID-19
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, has been presented as an adjusting item.
A related tax charge of GBP1.0 million has also been recognised in
the year.
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 52 weeks to 28 March 2020 a credit of GBP5.0 million
(last year: credit of GBP6.9 million) has been recorded relating to
reassessments of provisions for contract termination and
consideration for assets transferred to Coty on completion. A
related tax charge of GBP1.0 million (last year: GBP1.3 million)
has also been recognised in the year.
The net gain on disposal is presented as an adjusting item in
accordance with the Group's accounting policy as it arises from the
disposal of a business.
Restructuring costs
Restructuring costs of GBP10.6 million (last year: GBP12.2
million) were incurred in the current year, arising as a result of
the Group's cost-efficiency programme announced in May 2016. These
costs are presented as an adjusting item as they are considered
material and one-off in nature, being part of a restructuring
programme running from May 2016 to March 2021. The costs in the
current year are principally attributable to redundancies and
functional restructuring costs. A related tax credit of GBP2.2
million (last year: GBP2.2 million) has also been recognised in the
current year.
Items relating to the deferred consideration liability
On 22 April 2016, the Group entered into an agreement to
transfer the economic right to the non-controlling interest in
Burberry Middle East LLC to the Group in consideration of
contingent payments to be made to the minority shareholder over the
period to 2023.
A credit of GBP2.1 million in relation to the revaluation of
this balance has been recognised in operating expenses for the 52
weeks to 28 March 2020 (last year: credit of GBP4.4 million). A
financing charge of GBP1.0 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 52 weeks
to 28 March 2020 (last year: GBP1.7 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 GBP0.2 million in relation to the
unwinding of the discount on the non-current portion of the
deferred consideration liability has been recognised for the 52
weeks to 28 March 2020 (last year: GBPnil). These movements are
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.
8. Financing
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Note GBPm GBPm
--------------------------------------------------- ---- --------- ---------
Bank interest income - amortised cost 2.1 1.9
Other finance income - amortised cost 0.6 0.8
--------------------------------------------------- ---- --------- ---------
Finance income - amortised cost 2.7 2.7
Bank interest income - fair value through profit
and loss 4.9 6.0
Finance income 7.6 8.7
Interest expense on lease liabilities1 19 (24.9) -
Interest expense on bank loans and overdrafts (0.6) (0.6)
Bank charges (0.8) (0.7)
Other finance expense (0.3) (2.3)
--------------------------------------------------- ---- --------- ---------
Finance expense (26.6) (3.6)
--------------------------------------------------- ---- --------- ---------
Finance charge on deferred consideration liability 7 (1.2) (1.7)
Net finance (expense)/income (20.2) 3.4
--------------------------------------------------- ---- --------- ---------
1. Interest expense on lease liabilities of GBP24.9 million have
been recorded for the current year, as a result of the adoption of
IFRS 16 Leases. Refer to note 1 for details of adoption of IFRS 16
Leases.
9. Taxation
Analysis of charge for the year recognised in the Group Income
Statement:
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
--------------------------------------------------- --------- ---------
Current tax
UK corporation tax
Current tax on income for the 52 weeks to 28 March
2020 at 19% (last year: 19%) 58.7 62.3
Double taxation relief (3.3) (2.8)
Adjustments in respect of prior years 0.2 (7.0)
--------------------------------------------------- --------- ---------
55.6 52.5
Foreign tax
Current tax on income for the year 27.4 54.3
Adjustments in respect of prior years (1.3) (0.1)
--------------------------------------------------- --------- ---------
Total current tax 81.7 106.7
--------------------------------------------------- --------- ---------
Deferred tax
UK deferred tax
Origination and reversal of temporary differences (6.4) 3.5
Impact of changes to tax rates (1.4) -
Adjustments in respect of prior years (0.6) (0.1)
--------------------------------------------------- --------- ---------
(8.4) 3.4
Foreign deferred tax
Origination and reversal of temporary differences (30.0) (10.7)
Impact of changes to tax rates - (0.1)
Adjustments in respect of prior years 3.6 2.2
--------------------------------------------------- --------- ---------
Total deferred tax (34.8) (5.2)
--------------------------------------------------- --------- ---------
Total tax charge on profit 46.9 101.5
--------------------------------------------------- --------- ---------
9. Taxation (Continued)
Analysis of charge for the year recognised in other
comprehensive income and directly in equity:
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
------------------------------------------------------------ --------- ---------
Current tax
Recognised in other comprehensive income
Current tax charge on exchange differences on loans
(foreign currency translation reserve) 0.9 1.3
Current tax charge/(credit) on cash flow hedges deferred
in equity (hedging reserve) 0.3 (0.2)
Current tax charge/(credit) on cash flow hedges transferred
to income (hedging reserve) 0.2 (0.2)
Current tax (credit)/charge on net investment hedges
deferred in equity (hedging reserve) (0.2) 0.2
------------------------------------------------------------ --------- ---------
Total current tax recognised in other comprehensive
income 1.2 1.1
------------------------------------------------------------ --------- ---------
Recognised in equity
Current tax credit on share options (retained earnings) (0.9) (2.0)
------------------------------------------------------------ --------- ---------
Total current tax recognised directly in equity (0.9) (2.0)
------------------------------------------------------------ --------- ---------
Recognised in equity
Deferred tax charge on share options (retained earnings) 1.5 0.2
------------------------------------------------------------ --------- ---------
Total deferred tax recognised directly in equity 1.5 0.2
------------------------------------------------------------ --------- ---------
On adoption of IFRIC 23 Uncertainty over Income Tax treatments
in the current year (refer to note 1) current tax liabilities were
increased by GBP4.4 million, with a corresponding charge to equity.
On adoption of IFRS 16 Leases in the current year (refer to note 1)
deferred tax assets were increased by GBP16.4 million, with a
corresponding credit to equity. These movements, which were
recorded in equity on adoption of IFRIC 23 and IFRS 16, are not
included within the current year movements recognised in equity
presented in the table above.
The tax rate applicable on profit varied from the standard rate
of corporation tax in the UK due to the following factors:
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
----------------------------------------------------------- --------- ---------
Profit before taxation 168.5 440.6
Tax at 19% (last year: 19%) on profit before taxation 32.0 83.7
Rate adjustments relating to overseas profits (2.2) 11.5
Permanent differences 17.4 12.8
Tax on dividends not creditable 1.2 3.8
Current year tax losses not recognised 2.2 2.5
Prior year temporary differences and tax losses recognised (4.2) (7.8)
Adjustments in respect of prior years 1.9 (5.0)
Adjustments to deferred tax relating to changes in
tax rates (1.4) -
----------------------------------------------------------- --------- ---------
Total taxation charge 46.9 101.5
----------------------------------------------------------- --------- ---------
Total taxation recognised in the Group Income Statement arises
on the following items:
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
--------------------------------------- --------- ---------
Tax on adjusted profit before taxation 92.3 102.4
Tax on adjusting items (45.4) (0.9)
Total taxation charge 46.9 101.5
--------------------------------------- --------- ---------
10. Earnings per share
The calculation of basic earnings per share is based on profit
or loss attributable to owners of the Company for the year divided
by the weighted average number of ordinary shares in issue during
the year. Basic and diluted earnings per share based on adjusted
profit before taxation are also disclosed to indicate the
underlying profitability of the Group.
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
-------------------------------------------------- --------- ---------
Attributable profit for the year before adjusting
items1 321.9 341.0
Effect of adjusting items1 (after taxation) (200.2) (1.7)
-------------------------------------------------- --------- ---------
Attributable profit for the year 121.7 339.3
-------------------------------------------------- --------- ---------
1. Refer to note 7 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 year, 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 year. 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.
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
Millions Millions
-------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares in issue
during the year 408.0 412.3
Dilutive effect of the employee share incentive schemes 1.0 2.8
-------------------------------------------------------- --------- ---------
Diluted weighted average number of ordinary shares
in issue during the year 409.0 415.1
-------------------------------------------------------- --------- ---------
11. Dividends paid to owners of the Company
52 weeks 52 weeks
to to
28 March 30 March
2020 2019
GBPm GBPm
------------------------------------------------------ --------- ---------
Prior year final dividend paid 31.5p per share (prior
year: 30.3p) 129.2 126.0
Interim dividend paid 11.3p per share (prior year:
11.0p) 46.0 45.1
------------------------------------------------------ --------- ---------
Total 175.2 171.1
------------------------------------------------------ --------- ---------
The Directors have elected not to declare a final dividend in
respect of the 52 weeks to 28 March 2020 (last year: 31.5p).
12. Intangible assets
Intangible
Trademarks, assets
licences in the
and other course
intangible Computer of
Goodwill assets software construction Total
Cost GBPm GBPm GBPm GBPm GBPm
---------------------------------------- -------- ----------- --------- ------------- ------
As at 31 March 2018 94.9 18.2 130.2 46.5 289.8
Effect of foreign exchange rate
changes 0.7 - 0.9 - 1.6
Additions - 0.4 13.8 39.8 54.0
Business combination 19.5 - - - 19.5
Disposals - (6.1) (31.0) - (37.1)
Reclassifications from assets
in the course of construction - - 39.4 (39.4) -
As at 30 March 2019 115.1 12.5 153.3 46.9 327.8
Effect of foreign exchange rate
changes 1.0 0.1 0.1 - 1.2
Additions - 0.4 27.0 35.9 63.3
Reclassifications from assets
in the course of construction - 0.2 18.4 (18.6) -
As at 28 March 2020 116.1 13.2 198.8 64.2 392.3
---------------------------------------- -------- ----------- --------- ------------- ------
Accumulated amortisation and impairment
---------------------------------------- -------- ----------- --------- ------------- ------
As at 31 March 2018 6.5 10.4 92.8 - 109.7
Effect of foreign exchange rate
changes - - 0.9 - 0.9
Charge for the year - 0.9 27.7 - 28.6
Disposals - (6.1) (30.2) - (36.3)
Impairment charge on assets - - 3.9 - 3.9
As at 30 March 2019 6.5 5.2 95.1 - 106.8
Effect of foreign exchange rate
changes 0.3 - 0.2 - 0.5
Charge for the year - 0.9 25.5 - 26.4
Impairment charge on assets - - - 11.6 11.6
As at 28 March 2020 6.8 6.1 120.8 11.6 145.3
---------------------------------------- -------- ----------- --------- ------------- ------
Net book value
---------------------------------------- -------- ----------- --------- ------------- ------
As at 28 March 2020 109.3 7.1 78.0 52.6 247.0
As at 30 March 2019 108.6 7.3 58.2 46.9 221.0
---------------------------------------- -------- ----------- --------- ------------- ------
During the 52 weeks to 28 March 2020 an impairment charge of
GBP11.6 million was recognised in relation to computer software
assets under construction (last year: GBPnil). GBP10.0 million of
this charge related to rescheduling of the development of a
software project following changes to management investment plans
due to the impact of COVID-19. As a result of this delay,
management no longer expect to fully utilise the expenditure
incurred to date. The recoverable value of the asset at the balance
sheet date is GBP25.8 million. GBP10.0 million of the impairment
charge has been presented as an adjusting item relating to COVID-19
(refer to note 7).
12. Intangible assets (continued)
Impairment testing of goodwill
The carrying value of the goodwill allocated to cash generating
units:
As at As at
28 March 30 March
2020 2019
GBPm GBPm
------------------------------ --------- ---------
China 48.2 48.4
Korea 27.3 27.9
Retail and wholesale segment1 19.7 19.0
Other 14.1 13.3
------------------------------ --------- ---------
Total 109.3 108.6
------------------------------ --------- ---------
1. Goodwill which arose on acquisition of Burberry Manifattura
S.R.L. has been allocated to the group of cash generating units
which make up the Group's retail and wholesale operating segment
cash generating unit. This reflects the level at which the goodwill
is being monitored by management.
The Group tests goodwill for impairment annually or where there
is an indication that goodwill might be impaired. The recoverable
amount of all cash generating units has been determined on a
value-in-use basis. Value-in-use calculations for each cash
generating unit are based on projected pre-tax discounted cash
flows together with a discounted terminal value. The cash flows
have been discounted at pre-tax rates reflecting the Group's
weighted average cost of capital adjusted for country-specific tax
rates and risks. Where the cash generating unit has a
non-controlling interest which was recognised at a value equal to
its proportionate interest in the net identifiable assets of the
acquired subsidiary at the acquisition date, the carrying amount of
the goodwill has been grossed up, to include the goodwill
attributable to the non-controlling interest, for the purpose of
impairment testing the goodwill attributable to the cash generating
unit. The key assumptions contained in the value-in-use
calculations include the future revenues, the margins achieved, the
assumed life of the business and the discount rates applied.
The value-in-use calculations have been prepared using
management's cost and revenue projections for the next two years
combined with a longer term growth rate for the following three
years to 29 March 2025. A terminal value has been included in the
value-in-use calculation based on the cash flows for the year
ending 29 March 2025 incorporating the assumption that growth
beyond 29 March 2025 is equivalent to long term inflation
expectations. These projections are based on managements'
assumptions regarding the likely trading performance over the next
two years, taking into account the effect of COVID-19, and growth
for the following three years reflecting its expected impact on the
global economic environment in the longer term (refer to note
1).
The value-in-use estimates indicated that the recoverable amount
of goodwill exceeded the carrying value for each of the cash
generating units. As a result, no impairment has been recognised in
respect of the carrying value of goodwill in the year.
For the material goodwill balances of China, Korea and the
retail and wholesale segment, sensitivity analyses have been
performed by management. The sensitivities include applying a 15%
reduction in revenue and gross margin from managements' base cash
flow projections, considering the potential outcome from a more
extended duration of COVID-19. Under this more severe but plausible
scenario, the estimated recoverable amount of goodwill in China,
Korea and the retail and wholesale segment still exceeded the
carrying value.
The pre-tax discount rates for China, Korea and the retail and
wholesale segment were 15.0%, 13.4% and 11.1% respectively (last
year: China 16.0%, Korea 14.0%, and the retail and wholesale
segment 11.1%).
The other goodwill balance of GBP14.1 million (last year:
GBP13.3 million) consists of amounts relating to seven cash
generating units none of which have goodwill balances individually
exceeding GBP7.0 million as at 28 March 2020.
13. Property, plant and equipment
Fixtures, Assets
Freehold fittings in the
land and Leasehold and course
buildings improvements equipment of construction Total
Cost GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ---------- ------------- ---------- ---------------- -------
As at 31 March 2018 136.3 462.1 488.7 18.9 1,106.0
Effect of foreign exchange rate
changes 8.5 14.0 13.0 1.1 36.6
Additions 0.2 26.2 23.5 25.9 75.8
Business combination - - 0.5 - 0.5
Disposals (0.2) (56.9) (190.3) - (247.4)
Reclassifications from assets
in the course of construction - 5.2 13.7 (18.9) -
---------------------------------------- ---------- ------------- ---------- ---------------- -------
As at 30 March 2019 144.8 450.6 349.1 27.0 971.5
Adjustment on initial application
of IFRS 161 - - (2.9) - (2.9)
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Adjusted balance as at 31 March
2019 144.8 450.6 346.2 27.0 968.6
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Effect of foreign exchange rate
changes 5.7 9.1 7.5 (0.2) 22.1
Additions - 50.9 23.1 21.6 95.6
Disposals (3.6) (26.2) (15.8) (0.7) (46.3)
Reclassifications from assets
in the course of construction - 12.4 11.8 (24.2) -
As at 28 March 2020 146.9 496.8 372.8 23.5 1,040.0
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Accumulated depreciation and impairment
---------------------------------------- ---------- ------------- ---------- ---------------- -------
As at 31 March 2018 46.2 316.4 429.8 - 792.4
Effect of foreign exchange rate
changes 3.3 9.6 11.2 - 24.1
Charge for the year 4.3 42.7 40.2 - 87.2
Disposals (0.2) (56.7) (190.1) - (247.0)
Net impairment charge on assets - 1.6 6.3 - 7.9
---------------------------------------- ---------- ------------- ---------- ---------------- -------
As at 30 March 2019 53.6 313.6 297.4 - 664.6
Adjustment on initial application
of IFRS 161 - - (2.2) - (2.2)
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Adjusted balance as at 31 March
2019 53.6 313.6 295.2 - 662.4
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Effect of foreign exchange rate
changes 2.3 6.8 6.5 - 15.6
Charge for the year 4.1 47.7 31.5 - 83.3
Disposals (0.6) (26.2) (15.8) - (42.6)
Net impairment (reversal)/charge
on assets (0.5) 20.7 5.7 0.5 26.4
As at 28 March 2020 58.9 362.6 323.1 0.5 745.1
---------------------------------------- ---------- ------------- ---------- ---------------- -------
Net book value
---------------------------------------- ---------- ------------- ---------- ---------------- -------
As at 28 March 2020 88.0 134.2 49.7 23.0 294.9
As at 30 March 2019 91.2 137.0 51.7 27.0 306.9
---------------------------------------- ---------- ------------- ---------- ---------------- -------
1. Finance lease assets, which were presented in fixtures,
fittings and equipment as at 30 March 2019, have been reclassified
to right-of-use assets on adoption of IFRS 16 Leases. Refer to note
1 for details of adoption of IFRS 16 Leases.
13. Property, plant and equipment (continued)
COVID-19 is expected to have a significant impact on the Group's
retail operations in the 52 weeks to 27 March 2021 and beyond, with
many of its retail stores currently closed as a result of
government restrictions in a number of countries worldwide. As a
result management have carried out a review for potential
impairment across the whole retail portfolio. The impairment review
compared the value-in-use of the retail cash generating units to
the carrying values at 28 March 2020 including the value of any
right-of-use assets. The pre-tax cash flow projections were based
on managements' assumptions regarding the expected trading
performance over the next two years, taking into account the impact
of COVID-19, and growth thereafter reflecting the global economic
environment in the longer term, using growth rates and inflation
rates appropriate to each store's location.
The pre-tax discount rates used in these calculations were
between 9.2% and 21.1% (last year: between 10.4% and 25.3%), based
on the Group's weighted average cost of capital adjusted for
country-specific tax rates and risks. Where 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.
During the 52 weeks to 28 March 2020, a charge of GBP156.5
million was recorded within net operating expenses as a result of
the review of impairment of retail store assets for 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. Refer to note 14 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 GBP41.3 million increase /
GBP31.5 million decrease in the impairment charge of retail store
assets in the 52 weeks to 28 March 2020.
The charge relating to COVID-19 has been presented as an
adjusting item (refer to note 7).
During the 52 weeks to 28 March 2020, a net charge of GBP11.2
million (last year: GBP11.2 million) was recorded within net
operating expenses as a result of the annual review of impairment
of retail store assets. This review was carried out during the
year, and did not include any impacts relating to COVID-19. A
credit of GBP2.0 million (last year: charge of GBP7.5 million) was
recorded against property, plant and equipment and a charge of
GBP13.2 million (last year: GBPnil) was recorded against
right-of-use assets. In the prior year, GBP3.7 million was charged
in relation to onerous lease provisions. Refer to note 20 for
further details of onerous lease provisions.
In the 52 weeks to 30 March 2019, an impairment charge of GBP0.4
million was recorded relating to stores being closed as part of the
non-strategic store closure programme.
As a result, the total impairment charge recorded in property,
plant and equipment was GBP26.4 million (last year: GBP7.9 million)
relating to 140 retail cash generating units (last year: 26 retail
cash generating units) for which the total recoverable amount at
the balance sheet date is GBP59.9 million (last year: GBP18.1
million).
14. Right-of-use assets
Property Non-property
right- right-of-use
of-use assets assets Total
Net Book Value GBPm GBPm GBPm
---------------------------------------- -------------- ------------- -------
As at 30 March 2019 - - -
Adjustment on initial application of
IFRS 16 877.4 0.7 878.1
---------------------------------------- -------------- ------------- -------
Adjusted balance as at 31 March 2019 877.4 0.7 878.1
---------------------------------------- -------------- ------------- -------
Effect of foreign exchange rate changes 22.9 - 22.9
Additions 277.9 - 277.9
Remeasurements 16.5 - 16.5
Depreciation for the year (220.8) (0.3) (221.1)
Net impairment charge on assets (140.3) - (140.3)
As at 28 March 2020 833.6 0.4 834.0
---------------------------------------- -------------- ------------- -------
On adoption of IFRS 16, all impairment and onerous leases across
existing leased properties were remeasured to take account of the
impact of the change in accounting for leases on the measurement of
impairments. No changes in underlying assumptions were made during
this remeasurement. As a result of the remeasurement, an impairment
of right-of-use assets of GBP121.9 million was recorded, with a
corresponding charge to equity of GBP57.5 million, net of a
reversal of existing onerous lease provisions of GBP48.0 million
and an increase in deferred tax assets of GBP16.4 million. The
impairment charge recorded of GBP121.9 million related to 63 retail
cash generating units and two other properties, for which the total
recoverable amount at the date of adoption were GBP200.1
million.
As a result of the assessment of retail cash generating units
for impairment, a charge of GBP141.3 million was recorded for
impairment of right-of-use assets. Refer to note 13 for further
details. The impairment charge consists of GBP128.1 million
relating to the impact of COVID-19 on the value-in-use of retail
cash generating units and a charge of GBP13.2 million relating to
other trading impacts during the year. The charge relating to
COVID-19 has been presented as an adjusting item (refer to note
7).
The impairment charge recorded in right-of-use assets relates to
140 retail cash generating units for which the total recoverable
amount at the balance sheet date is GBP344.7 million.
An impairment reversal of GBP1.0 million relating to other
properties was recorded in the year.
15. Trade and other receivables
As at As at
28 March 30 March
2020 2019
GBPm GBPm
---------------------------------------------- --------- ---------
Non-current
Deposits and other financial receivables 46.9 41.0
Other non-financial receivables 4.1 3.0
Prepayments1 2.7 26.1
---------------------------------------------- --------- ---------
Total non-current trade and other receivables 53.7 70.1
---------------------------------------------- --------- ---------
Current
Trade receivables 123.5 124.5
Provision for doubtful debts (16.5) (4.8)
---------------------------------------------- --------- ---------
Net trade receivables 107.0 119.7
Other financial receivables 31.9 32.6
Other non-financial receivables 67.4 37.9
Prepayments1 35.0 50.7
Accrued income 10.8 10.2
---------------------------------------------- --------- ---------
Total current trade and other receivables 252.1 251.1
---------------------------------------------- --------- ---------
Total trade and other receivables 305.8 321.2
---------------------------------------------- --------- ---------
1. Upon adoption of IFRS 16 Leases, prepayments as at 30 March
2019 relating to leases recognised on the balance sheet were
reclassified to be included in the measurement of the initial
right-of-use asset. Refer to note 1 for further details.
Included in total trade and other receivables are non-financial
assets of GBP109.2 million (last year: GBP117.7 million).
16. Inventories
As at As at
28 March 30 March
2020 2019
GBPm GBPm
------------------ --------- ---------
Raw materials 13.3 15.4
Work in progress 1.5 0.9
Finished goods 435.7 448.8
------------------ --------- ---------
Total inventories 450.5 465.1
------------------ --------- ---------
As at As at
28 March 30 March
2020 2019
GBPm GBPm
------------------------- --------- ---------
Total inventories, gross 620.0 557.3
Provisions (169.5) (92.2)
------------------------- --------- ---------
Total inventories, net 450.5 465.1
------------------------- --------- ---------
Inventory provisions of GBP169.5 million (last year: GBP92.2
million) are recorded, representing 27.3% (last year: 16.5%) 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.
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP893.1 million (last year: GBP822.0
million). Of this charge, GBP68.3 million has arisen as a result of
the estimated reduction in net realisable value of inventory due to
COVID-19 and has been presented as an adjusting item.
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, 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 24.1% to 30.6% as a percentage of the gross value of
inventory as at 28 March 2020.
The net movement in inventory provisions included in cost of
sales for the 52 weeks to 28 March 2020 was a cost of GBP88.9
million (last year: GBP15.7 million). The reversal of inventory
provisions as at 30 March 2019 during the current year was GBP16.2
million (last year: reversal of GBP30.0 million).
The cost of finished goods physically destroyed in the year was
GBP0.1 million (last year: GBP2.2 million).
17. Cash and cash equivalents
As at As at
28 March 30 March
2020 2019
GBPm GBPm
----------------------------------------------------- --------- ---------
Cash and cash equivalents held at amortised cost
Cash at bank and in hand 138.7 151.3
Short-term deposits 126.3 75.2
----------------------------------------------------- --------- ---------
265.0 226.5
Cash and cash equivalents held at fair value through
the profit and loss
Short-term deposits 663.9 648.0
----------------------------------------------------- --------- ---------
Total 928.9 874.5
----------------------------------------------------- --------- ---------
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.
As at 28 March 2020 and 30 March 2019, no impairment losses were
identified on cash and cash equivalents held at amortised cost.
18. Trade and other payables
As at As at
28 March 30 March
2020 2019
GBPm GBPm
-------------------------------------------- --------- ---------
Non-current
Other payables 7.1 2.9
Deferred income and non-financial accruals2 4.1 70.8
Contract liabilities 77.0 83.6
Deferred consideration1 14.1 19.2
-------------------------------------------- --------- ---------
Total non-current trade and other payables 102.3 176.5
-------------------------------------------- --------- ---------
Current
Trade payables 197.3 221.6
Other taxes and social security costs 48.1 53.4
Other payables 3.9 4.5
Accruals2 175.2 209.3
Deferred income and non-financial accruals2 6.0 20.5
Contract liabilities 12.7 13.7
Deferred consideration1 4.3 2.7
-------------------------------------------- --------- ---------
Total current trade and other payables 447.5 525.7
-------------------------------------------- --------- ---------
Total trade and other payables 549.8 702.2
-------------------------------------------- --------- ---------
1. The change in the deferred consideration liability arises as
a result of a financing cash outflow and non-cash movements.
2. Upon adoption of IFRS 16 Leases, deferred income and accruals
at 30 March 2019 relating to leases recognised on the balance sheet
have been reclassified to be included in the measurement of the
initial right-of-use asset. Refer to note 1 for further
details.
Included in total trade and other payables are non-financial
liabilities of GBP147.9 million (last year: GBP242.0 million).
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 As at
28 March 30 March
2020 2019
GBPm GBPm
------------------------------- --------- ---------
Retail contract liabilities 6.1 7.1
Licensing contract liabilities 83.6 90.2
Total contract liabilities 89.7 97.3
------------------------------- --------- ---------
The amount of revenue recognised in the year relating to
contract liabilities at the start of the year is set out in the
following table. All revenue in the year relates to performance
obligations satisfied in the year. All contract liabilities at the
end of the year relate to unsatisfied performance obligations.
52 weeks
to 52 weeks
28 March to 30 March
2020 2019
GBPm GBPm
------------------------------------------------------------- --------- ------------
Retail revenue relating to contract liabilities 2.4 2.2
Deferred revenue from Beauty licence 6.6 6.5
Revenue recognised that was included in contract liabilities
at the start of the year 9.0 8.7
------------------------------------------------------------- --------- ------------
18. Trade and other payables (continued)
Deferred consideration
Following the purchase of the economic right to the
non-controlling interest in Burberry Middle East LLC on 22 April
2016, the Group has recognised a liability in relation to the
deferred consideration for this transaction. The deferred
consideration consisted of fixed payments to be paid over the
period 2016 to 2019, and contingent payments calculated as an
agreed percentage of the future revenue of Burberry Middle East LLC
and its subsidiaries, over the period 2016 to 2023. Payments of
GBP2.7 million were made in the 52 weeks to 28 March 2020 (last
year: GBP11.1 million).
The fair value of the deferred consideration has been estimated
using a present value calculation, incorporating observable and
non-observable inputs. The inputs applied in arriving at the value
of the deferred consideration are an estimate of the future revenue
of Burberry Middle East LLC and its subsidiaries from the current
year to 2023 and an appropriate risk--adjusted discount rate for
Burberry Middle East LLC.
The carrying value of the deferred consideration is dependent on
assumptions applied in determining these inputs, and is subject to
change in the event that there is a change in any of these
assumptions. The valuation is updated at every reporting period or
more often if a significant change to any input is observed.
A 10% increase in the estimate of future revenues of Burberry
Middle East LLC and its subsidiaries would result in a GBP0.9
million increase in the carrying value of the deferred
consideration at 28 March 2020 and a corresponding GBP0.9 million
decrease in the profit before taxation for the 52 weeks to 28 March
2020.
Deferred consideration of GBP6.9 million at 28 March 2020 (last
year: GBP6.5 million) relates to the acquisition of Burberry
Manifattura S.R.L. on 19 September 2018 and consists of a future
performance related payment to be made in 2021. The amount of the
performance related payment is dependent upon the acquired business
achieving against several performance criteria and will be assessed
over the three year period. Initial deferred consideration was
recognised as the maximum amount payable, discounted using an
appropriate discount rate linked to the borrowing rate. Based on
performance since the acquisition, the deferred consideration
continues to be estimated at the maximum amount payable.
19. Lease Liabilities
Property Non-Property
lease liabilities lease liabilities Total
GBPm GBPm GBPm
------------------------------------------ ------------------ ------------------ -------
Balance as at 30 March 2019 - - -
Adjustment on initial application of IFRS
16 1,044.3 0.7 1,045.0
------------------------------------------ ------------------ ------------------ -------
Adjusted balance as at 31 March 2019 1,044.3 0.7 1,045.0
------------------------------------------ ------------------ ------------------ -------
Effect of foreign exchange rate changes 31.9 - 31.9
Created during the year 272.3 - 272.3
Amounts paid(1) (253.0) (0.3) (253.3)
Discount unwind 24.9 - 24.9
Remeasurements 4.7 - 4.7
Balance as at 28 March 2020 1,125.1 0.4 1,125.5
------------------------------------------ ------------------ ------------------ -------
As at
28 March
2020
GBPm
------------------------------------- ---------
Analysis of total lease liabilities:
Non-current 910.0
Current 215.5
Total 1,125.5
------------------------------------- ---------
1. The amounts paid of GBP253.3 million includes GBP228.4
million arising as a result of a financing cash outflow and GBP24.9
million arising as a result of an operating cash outflow.
The Group enters into property leases for retail properties,
including stores, concessions, warehouse and storage locations and
office property. The remaining lease term for these properties
range from a few months to 18 years. Many of the leases include
break options and/or extension options. Some of the leases for
concessions have rolling lease terms or rolling break options.
Management assess the lease term at inception based on the facts
and circumstances applicable to each property including the period
over which the investment appraisal was initially considered.
19. Lease Liabilities (continued)
Management reviews the retail lease portfolio on an ongoing
basis, taking into account retail performance and future trading
expectations. Management may exercise extension options, negotiate
lease extensions or modifications. In other instances, management
may exercise break options, negotiate lease reductions or decide
not to negotiate a lease extension at the end of the lease term.
The most significant factor impacting future lease payments is
changes management choose to make to the store portfolio.
Many of the retail property leases also incur payments based on
a percentage of revenue achieved at the location. Changes in future
variable lease payments will typically reflect changes in the
Group's retail revenues.
The Group also enters into non-property leases for equipment,
advertising fixtures and machinery. Generally, these leases do not
include break or extension options. The most significant impact to
future cash flows relating to leased equipment, which are primarily
short-term, would be the Group's usage of leased equipment to a
greater or lesser extent.
The Group's accounting policy for leases is set out in note 1.
Details of income statement charges and income for leases are set
out in note 6. The right-of-use asset categories on which
depreciation is incurred are presented in note 14. Interest expense
incurred on lease liabilities is presented in note 8.
Total cash outflows in relation to leases in the 52 weeks ended
28 March 2020 are GBP383.4 million. This relates to payments of
GBP228.4 million on lease principal, GBP24.9 million on lease
interest, GBP99.3 million on variable lease payments, and GBP30.8
million other lease payments principally relating to short-term
leases and leases in holdover.
20. Provisions for other liabilities and charges
Property Other
obligations costs Total
GBPm GBPm GBPm
--------------------------------------------- ------------ ------ ------
Balance as at 31 March 2018 86.7 16.8 103.5
Effect of foreign exchange rate changes 2.6 0.1 2.7
Created during the year 18.4 2.4 20.8
Discount unwind 1.2 - 1.2
Utilised during the year (8.2) (7.2) (15.4)
Released during the year (21.3) (6.2) (27.5)
--------------------------------------------- ------------ ------ ------
Balance as at 30 March 2019 79.4 5.9 85.3
Adjustment on initial application of IFRS 16 (48.0) - (48.0)
--------------------------------------------- ------------ ------ ------
Adjusted balance as at 31 March 2019 31.4 5.9 37.3
--------------------------------------------- ------------ ------ ------
Effect of foreign exchange rate changes 1.1 0.1 1.2
Created during the year 7.3 3.9 11.2
Discount unwind 0.1 - 0.1
Utilised during the year (3.1) (2.1) (5.2)
Released during the year (1.3) (1.5) (2.8)
--------------------------------------------- ------------ ------ ------
Balance as at 28 March 2020 35.5 6.3 41.8
--------------------------------------------- ------------ ------ ------
At 30 March 2019, GBP48.0 million of onerous leases were
included within property obligations. On the adoption of IFRS 16
Leases, those onerous lease obligations related to right-of-use
assets have been released and impairments have been recognised
against the related right-of-use asset (refer to note 1 adoption of
IFRS 16 Leases and note 14).
The net charge in the year for property obligations is GBP6.0
million, relating to additional property reinstatements costs.
For the 52 weeks to 30 March 2019 the net reversal of GBP2.9
million for property obligations included a reversal of GBP8.1
million relating to onerous lease provisions. This included charges
of GBP3.7 million relating to retail stores and a reversal of
GBP11.8 million relating to other properties. The remaining charge
of GBP5.2 million mainly related to additional property
reinstatement costs.
20. Provisions for other liabilities and charges (Continued)
Releases in other costs in the prior year included a GBP6.1
million reduction in provision for contract terminations arising
from the Beauty operations disposal.
As at As at
28 March 30 March
2020 2019
GBPm GBPm
------------------------------ --------- ---------
Analysis of total provisions:
Non-current 28.6 50.7
Current 13.2 34.6
------------------------------ --------- ---------
Total 41.8 85.3
------------------------------ --------- ---------
The non-current provisions relate to property reinstatement
costs which are expected to be utilised within 18 years (as at 30
March 2019: 19 years).
21. Bank overdrafts
Included within bank overdrafts is GBP40.9 million (last year:
GBP37.2 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 28 March 2020, the Group held bank
overdrafts of GBP0.7 million (last year: GBPnil) excluding balances
on cash pooling arrangements.
The fair value of overdrafts approximate the carrying amount
because of the short maturity of these instruments.
22. Borrowings
On 25 November 2014, the Group entered into a GBP300.0 million
multi-currency revolving credit facility with a syndicate of banks.
The facility matures in November 2021. In March 2020, the Group
drew down on this facility in full. The GBP300.0 million proceeds
of this drawdown were received by the Group in cash and shown as a
financing cash inflow.
At 28 March 2020, there were GBP300.0 million outstanding
drawings (last year: GBPnil), maturing between one to two years of
the balance sheet date. During the year ending 28 March 2020 the
non-cash changes to bank borrowing amounted to GBPnil (last year:
GBPnil).
The Group is in compliance with the financial and other
covenants within this facility and has been in compliance
throughout the financial year.
23. Share capital and reserves
Allotted, called up and fully paid share capital Number GBPm
------------------------------------------------------ ----------- ----
Ordinary shares of 0.05p (as at 30 March 2019: 0.05p)
each
------------------------------------------------------ ----------- ----
As at 31 March 2018 418,275,123 0.2
Allotted on exercise of options during the year 185,349 -
Cancellation of treasury shares (7,004,471) -
------------------------------------------------------ ----------- ----
As at 30 March 2019 411,456,001 0.2
Allotted on exercise of options during the year 434,790 -
Cancellation of treasury shares (7,184,905) -
------------------------------------------------------ ----------- ----
As at 28 March 2020 404,705,886 0.2
------------------------------------------------------ ----------- ----
The Company has a general authority from shareholders, renewed
at each Annual General Meeting, to repurchase a maximum of 10% of
its issued share capital. During the 52 weeks to 28 March 2020, the
Company entered into agreements to purchase GBP150.0 million of its
own shares back, excluding stamp duty, as part of a share buy-back
programme (last year: GBP150.0 million). 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. In the 52 weeks to 28 March 2020, 7.2 million treasury
shares with a nominal value of GBP3,600 were cancelled (last year:
7.0 million treasury shares with a nominal value of GBP3,500).
23. Share capital and reserves (Continued)
The cost of shares purchased by ESOP trusts are offset against
retained earnings, as the amounts paid reduce the profits available
for distribution by the Company. As at 28 March 2020, the amount of
own shares held by ESOP trusts and offset against retained earnings
is GBP19.5 million (last year: GBP26.4 million). As at 28 March
2020, the ESOP trusts held 1.2 million shares (last year: 1.6
million) in the Company, with a market value of GBP15.7 million
(last year: GBP31.9 million). In the 52 weeks to 28 March 2020 the
ESOP trusts and the Company have waived their entitlement to
dividends of GBP1.0 million (last year: GBP0.9 million).
The capital reserve consists of non-distributable reserves and
the capital redemption reserve arising on the purchase of own
shares.
Other reserves in the Statement of Changes in Equity consists of
the capital reserve, the foreign currency translation reserve, and
the hedging reserves. The hedging reserves consist of the cash flow
hedge reserve and the net investment hedge reserve.
Hedging reserves
-------------------------------------- -------- ------------------------- ------------ -----
Foreign
currency
Capital Cash flow Net investment translation
reserve hedges hedge reserve Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- --------- -------------- ------------ -----
Balance as at 31 March 2018 41.1 (0.2) 4.0 214.7 259.6
Other comprehensive income:
Cash flow hedges - losses deferred
in equity - (1.0) - - (1.0)
Cash flow hedges - gains transferred
to income - (1.1) - - (1.1)
Net investment hedges - gains
deferred in equity - - 1.6 - 1.6
Foreign currency translation
differences - - - 14.3 14.3
Tax on other comprehensive income - 0.4 (0.2) (1.3) (1.1)
-------------------------------------- -------- --------- -------------- ------------ -----
Total comprehensive income for
the year - (1.7) 1.4 13.0 12.7
-------------------------------------- -------- --------- -------------- ------------ -----
Balance as at 30 March 2019 41.1 (1.9) 5.4 227.7 272.3
Other comprehensive income:
Cash flow hedges - gains deferred
in equity - 1.8 - - 1.8
Cash flow hedges - losses transferred
to income - 0.9 - - 0.9
Net investment hedges - losses
deferred in equity - - (1.2) - (1.2)
Foreign currency translation
differences - - - 18.4 18.4
Tax on other comprehensive income - (0.5) 0.2 (0.9) (1.2)
-------------------------------------- -------- --------- -------------- ------------ -----
Total comprehensive income for
the year - 2.2 (1.0) 17.5 18.7
-------------------------------------- -------- --------- -------------- ------------ -----
Balance as at 28 March 2020 41.1 0.3 4.4 245.2 291.0
-------------------------------------- -------- --------- -------------- ------------ -----
As at 28 March 2020 the amount held in the hedging reserve
relating to matured net investment hedges is GBP4.4 million net of
tax (last year: GBP5.5 million).
24. Capital commitments
As at As at
28 March 30 March
2020 2019
GBPm GBPm
----------------------------------------------------- --------- ---------
Capital commitments contracted but not provided for:
Property, plant and equipment 29.5 17.7
Intangible assets 5.2 6.9
----------------------------------------------------- --------- ---------
Total 34.7 24.6
----------------------------------------------------- --------- ---------
Contracted capital commitments represent contracts entered into
by the year end and future work in respect of major capital
expenditure projects where activity has commenced by the year end
relating to property, plant and equipment and intangible
assets.
25. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Total
compensation in respect of key management, who are defined as the
Board of Directors and certain members of senior management, is
considered to be a related party transaction.
The total compensation in respect of key management for the year
was as follows:
52 weeks
to Year to
28 March 30 March
2020 2019
GBPm GBPm
-------------------------------------------------- --------- ---------
Salaries, short-term benefits and social security
costs 7.9 12.4
Termination benefits - 2.9
Share--based compensation (all awards and options
settled in shares) (0.8) 3.2
-------------------------------------------------- --------- ---------
Total 7.1 18.5
-------------------------------------------------- --------- ---------
There were no other material related party transactions in the
year.
26. 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.
27. Events After The Balance Sheet Date
On 14 May 2020, Burberry Limited issued commercial paper with a
face value of GBP300.0 million and a maturity of 17 March 2021. The
commercial paper was issued under the UK Government sponsored COVID
Corporate Finance Facility (CCFF). Proceeds of GBP298.4 million
were received by Burberry Limited on 14 May 2020.
Pro forma income statement (unaudited)
The re-presented income statements set out below do not form
part of the consolidated financial statements for the 52 weeks to
28 March 2020. They are included to provide an understanding of the
underlying performance for the 52 weeks to 28 March 2020, given
that IFRS 16 Leases has been adopted for the current period without
restatement of the comparative period. The re-presented income
statements consist of:
-- the reported income statement for the current period;
-- a pro forma income statement for the current period; and
-- the reported income statement for the prior year.
The pro forma income statement for the current period is an
estimation of the results for the period when applying the previous
accounting standard for leases, IAS 17 Leases.
52 weeks 52 weeks 52 weeks
to 28 March to 28 March to 30 March
2020 2020 2019
Reported Pro forma Reported
Re-presented Group Income Statement GBPm GBPm GBPm
------------------------------------------- ------------ ------------ ------------
Revenue 2,633.1 2,633.1 2,720.2
Cost of sales (927.6) (927.6) (859.4)
------------------------------------------- ------------ ------------ ------------
Gross profit 1,705.5 1,705.5 1,860.8
Net operating expenses (1,516.8) (1,545.8) (1,423.6)
------------------------------------------- ------------ ------------ ------------
Operating profit 188.7 159.7 437.2
Net finance (expense)/income (20.2) 4.7 3.4
------------------------------------------- ------------ ------------ ------------
Profit before taxation 168.5 164.4 440.6
Taxation (46.9) (46.0) (101.5)
------------------------------------------- ------------ ------------ ------------
Profit for the period 121.6 118.4 339.1
------------------------------------------- ------------ ------------ ------------
Attributable to:
Owners of the Company 121.7 118.5 339.3
Non-controlling interest (0.1) (0.1) (0.2)
------------------------------------------- ------------ ------------ ------------
Profit for the period 121.6 118.4 339.1
------------------------------------------- ------------ ------------ ------------
GBPm GBPm GBPm
Reconciliation of adjusted profit before
taxation:
Profit before taxation 168.5 164.4 440.6
Adjusting operating items:
Cost of sales 68.3 68.3 -
Operating expenses 176.1 176.1 0.9
Adjusting financing items 1.2 1.2 1.7
------------------------------------------- ------------ ------------ ------------
Adjusted profit before taxation - non-GAAP
measure 414.1 410.0 443.2
------------------------------------------- ------------ ------------ ------------
Adjusted earnings per share - diluted 78.7p 77.9p 82.1p
Earnings per share - diluted 29.8p 29.0p 81.7p
------------------------------------------- ------------ ------------ ------------
The pro forma income statement has been prepared using the
reported results for the current period and replacing the
accounting entries related to IFRS 16 Leases, on adoption and
during the period, with an estimate of the accounting entries that
would have arisen when applying IAS 17 Leases. The effective tax
rate has been assumed to be unaltered by this change and the
impairment charges arising during the period on right-of-use assets
have not been remeasured, but have been reclassified as charges for
onerous lease provisions.
The pro forma income statement for the current period has been
prepared by making adjustments to the reported income statement for
the current period to:
-- reverse depreciation of GBP221.1 million on the right-of-use
assets and interest of GBP24.9 million on lease liabilities in the
period;
-- record fixed rent of GBP245.9 million on leases in the period
measured on an IAS 17 basis, excluding charges for onerous lease
provisions;
-- adjust for other minor impacts including reversal of the gain
on disposal of right-of-use assets in the period of GBP2.1 million;
and
-- reduce the tax charge by GBP0.9 million to reflect the change
in profit before tax as a result of the adjustments above.
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.
END
FR KKDBBDBKBCPB
(END) Dow Jones Newswires
May 22, 2020 02:00 ET (06:00 GMT)
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