REG - Burberry Group PLC - Burberry Group plc Interim Results
16/11/2023 07:00
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RNS Number : 6180T Burberry Group PLC 16 November 2023
16 November 2023
BURBERRY GROUP PLC
INTERIM RESULTS FOR 26 WEEKS ENDED 30 SEPTEMBER 2023
"We made good progress against our strategic goals, executing our priorities
at pace. We continued to build momentum around our new creative vision with
the launch of our Winter 23 collection in September, the first designed by
Daniel Lee. While the macroeconomic environment has become more challenging
recently, we are confident in our strategy to realise our potential as the
modern British luxury brand, and we remain committed to achieving our medium
and long-term targets."
- Jonathan Akeroyd, Chief Executive Officer
Period ended 26 weeks ended 26 weeks ended YoY % change YoY % change
30 September 2023 1 October 2022 Reported FX CER
£ million
Revenue 1,396 1,345 4 7
Retail comparable store sales(*) 10% 5%
Adjusted operating profit(*) 223 238 (6) 1
Adjusted operating profit margin(*) 15.9% 17.7% (180bps) (110bps)
Adjusted diluted EPS (pence)(*) 42.1 44.3 (5) 2
Reported operating profit 223 263 (15)
Reported operating profit margin 15.9% 19.5% (360bps)
Reported diluted EPS (pence) 42.1 48.9 (14)
Free cash flow(*) (15) 88 nm(**)
Dividend (pence) 18.3 16.5 11
(*)See page 11 for definitions of alternative performance measures, (**) Not
meaningful
· Q2 comparable store sales increased 1%, with EMEIA +10%, Asia
Pacific +2%, Americas -10%
· Significant progress on our plan, executing our priorities at
pace
· Good performance across core outerwear and leather goods
categories
o Outerwear comparable store sales up 21% in H1 and 10% in Q2
o Leather goods comparable store sales up 8% in H1 and 3% in Q2
· Delivered a more coherent brand aesthetic with campaigns
generating significantly improved brand clarity, supported by a series of
high-impact activations
· Launched Winter 23 collection, broadening distribution and
ensuring greater visibility in stores compared with previous seasons; new
product complements core offer and early indicators are encouraging
· Continued investment in distribution, opening or refurbishing 33
stores in the half and refreshed website in line with our new creative vision
· Achieved efficiency improvements across the value chain in terms
of product availability, on time delivery and material waste re-use
· Strengthened supply chain with the completion of an outerwear
acquisition in Italy in early October
· £400m share buyback completed at end of October, with £200m
completed in H1
· Interim dividend of 18.3p, +11% based on 30% of FY23 full year
dividend
GUIDANCE
We are confident in our strategy and remain committed to achieving our medium
and long-term targets. The slowdown in luxury demand globally is having an
impact on current trading. If the weaker demand continues, we are unlikely to
achieve our previously stated revenue guidance for FY24*. In this context,
adjusted operating profit would be towards the lower end of the current
consensus range (£552m-£668m)**.
Based on the effective foreign exchange rates as of 25 October 2023, we now
expect a reduced currency headwind of c.£110m to revenue and c.£60m to
adjusted operating profit.
*High single-digit revenue CAGR from FY20 base equating to a low double-digit
growth in FY24 YoY.
** As published on our corporate website here
(https://www.burberryplc.com/investors/consensus) .
All metrics and commentary in the Group Financial Highlights and Business and
Financial Review exclude adjusting items unless stated otherwise.
The financial information contained herein is unaudited.
The following alternative performance measures are presented in this
announcement: CER, adjusted profit measures, comparable sales, free cash flow,
cash conversion, adjusted EBITDA and net debt. The definitions of these
alternative performance measures are in the Appendix on page 11.
Certain financial data within this announcement have been rounded. Growth
rates and ratios are calculated on unrounded numbers.
Enquiries
Investors and analysts 020 3367 3524
Julian Easthope VP, Investor Relations julian.easthope@burberry.com (mailto:julian.easthope@burberry.com)
Media 020 3367 3764
Andrew Roberts SVP, Corporate Relations and Engagement andrew.roberts@burberry.com
· There will be a virtual presentation for investors and
analysts today at 9.30am (UK time) that can be viewed live on the Burberry
website https://www.burberryplc.com/ (https://www.burberryplc.com/) and can
also be accessed live via a listen only dial-in facility, click here
(https://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=1349-2475-38525&target=en-default-&status=preview&browser=ns-0-1-0-0-0&stream=html5-video-1000)
to register
· The supporting slides and an indexed replay will be available
on the website later in the day
· Burberry will issue its Third Quarter Trading Update on 19
January 2024
Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and are subject to a number
of risks and uncertainties that could cause actual results to differ
materially from any expected future results in forward-looking statements.
Burberry Group plc undertakes no obligation to update these forward-looking
statements and will not publicly release any revisions it may make to these
forward-looking statements that may result from events or circumstances
arising after the date of this document. Nothing in this announcement should
be construed as a profit forecast. All persons, wherever located, should
consult any additional disclosures that Burberry Group plc may make in any
regulatory announcements or documents which it publishes. All persons,
wherever located, should take note of these disclosures. This announcement
does not constitute an invitation to underwrite, subscribe for or otherwise
acquire or dispose of any Burberry Group plc shares, in the UK, or in the US,
or under the US Securities Act 1933 or in any other jurisdiction.
Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent
of the FTSE 100 index. ADR symbol OTC:BURBY.
BURBERRY, the Equestrian Knight Device, the Burberry Check, and the Thomas
Burberry Monogram and Print are trademarks belonging to Burberry.
www.burberryplc.com
(https://eur02.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.burberryplc.com&data=02%7C01%7CAnnabel.Brownrigg-Gleeson%40burberry.com%7C3f1136908abc481061a408d74bde35fc%7C8535436a46bb4cc6a9c99ec392e449ee%7C0%7C0%7C637061290064335112&sdata=lQSxti5s8krLG0OWF40d0P9SA2vJk1lnJVSKR%2FJ8ulQ%3D&reserved=0)
LinkedIn: Burberry
BUSINESS REVIEW
In November 2022, we set out our strategy to realise Burberry's potential as
the modern British luxury brand with a medium-term target to grow sales to
£4bn and a longer-term ambition to reach £5bn. During the half, we made
significant progress against our plan, executing our priorities at pace.
We continued to invest in our creative vision with campaigns and activations
that were recognisably Burberry and told a coherent brand story. Our Winter 23
campaign showcased our new offer with a distinctive visual language that
celebrated our new and enduring brand codes and placed product centre stage.
The strong level of interest from fashion editors globally led to higher
volumes of editorials with more than two times the reach of our previous
Winter campaign.
We complemented the launch of Winter 23 with a series of city takeovers in
high-impact locations. Our "Burberry Streets" activations in London, Seoul and
Shanghai celebrated the art of exploration and brought our brand to life
through immersive experiences, installations and events. These initiatives
contributed to our highest level of brand clarity in the last three years as
well as continued growth in consumers who associate Burberry with
'Britishness' and 'Heritage', which are key to our luxury positioning.
In terms of our core product categories, outerwear comparable store sales
increased 21% in the half. This was driven by the strong performance of
Heritage rainwear across both men's and women's. Leather goods comparable
store sales advanced 8%, led by 14% growth in bags with ongoing momentum in
icons such as the Vintage Check and new shapes introduced for Winter 23 such
as the Knight bag and Trench tote gaining traction. In parallel, we continued
to expand and evolve ready-to-wear, and introduced a more complete shoe
offering.
The Winter 23 collection, the first designed by Daniel Lee, arrived in stores
in September. Across all categories, we supported the launch with a higher
level of investment in new product than in previous seasons, enabling us to
broaden distribution and ensure greater visibility in our stores. The new
product complements our existing strong core offer and while it is still too
soon to have an in-depth read on commercial performance, the early indicators
are encouraging.
We continued to build on this momentum with our Summer 24 show, also in
September, that was well attended by high profile talent from the worlds of
music, creative arts and sports. Through the collection, we further developed
the aesthetic and codes for the brand across leather goods, shoes and
ready-to-wear. The response has been highly positive with global reach from
press coverage more than doubling season on season.
In addition, our beauty business generated an excellent performance in the
half, driven by the successful launch of our latest fragrance Burberry
Goddess.
We continued to invest in distribution, opening or refurbishing 33 stores in
the half including New Bond Street London, Rodeo Drive Los Angeles and
Omotesando Tokyo. Financials of the updated stores continue to show both store
productivity and AUR up mid-teens percentage against equivalent existing
stores. We also refreshed our e-commerce website Burberry.com. Launched to
coincide with the arrival of our Winter 23 collection in stores, the website
offers customers a more elevated and cohesive experience aligned with our new
brand identity.
We further strengthened our supply chain in our core product categories with
completion in early October of the acquisition of a product development
business from our longstanding supplier Pattern SpA. This strategic investment
will enhance our technical outerwear capabilities and give us greater control
over the quality, cost, delivery, and sustainability of our offer.
At the same time, we maintained support for our communities, partnering with
Tate Britain for 'Sarah Lucas: HAPPY GAS', an exhibition honouring one of
Britain's leading artists. We also partnered with British artist Keith Khan
and LEEDS 2023 to create a series of bespoke textile artworks at the Burberry
Mill in Keighley to celebrate the 33 distinctive and diverse wards of the city
of Leeds.
We continued to progress our sustainability agenda, introducing plastic-free
packaging as part of our commitment to eliminate plastic from our consumer
packaging by FY26. We also expanded our aftercare services to help more of our
customers extend the life of their products.
SUMMARY INCOME STATEMENT
Period ended 26 weeks ended 26 weeks ended YoY % change YoY % change
£ million 30 September 1 October Reported FX CER
2023 2022
Revenue 1,396 1,345 4 7
Cost of sales* (421) (403) 4 6
Gross profit* 975 942 3 8
Gross margin* 69.8% 70.1% (30bps) 30bps
Net operating expenses* (752) (704) 7 10
Net opex as a % of sales* 53.9% 52.4% 150bps 140bps
Adjusted operating profit* 223 238 (6) 1
Adjusted operating profit margin* 15.9% 17.7% (180bps) (110bps)
Adjusting operating items - 25
Operating profit 223 263
Operating profit margin 15.9% 19.5% (360bps)
Net finance expense (4) (12)
Profit before taxation 219 251
Taxation (60) (57)
Non-controlling interest (1) (1)
Attributable profit 158 193
Adjusted profit before taxation* 219 226 (3) 4
Adjusted diluted EPS (pence)* 42.1 44.3 (5) 2
Diluted EPS (pence) 42.1 48.9 (14)
Weighted average number of diluted ordinary shares (millions) 376.1 394.4 (5)
*Excludes adjusting items. All items below adjusting operating items are on a
reported basis unless otherwise stated.
For detail, see Appendix.
FINANCIAL PERFORMANCE
Revenue by channel
Period ended 26 weeks 26 weeks YoY % change YoY % change
ended ended Reported FX CER
30 September 1 October
2023 2022
£ million
Retail 1,124 1,061 6 10
Retail comparable store sales 10% 5%
Wholesale 241 263 (8) (8)
Licensing 31 21 45 44
Revenue 1,396 1,345 4 7
In the half:
· Retail sales grew 10% at CER; 6% reported
· Comparable store sales grew 10% with no impact from space
Comparable store sales growth by region
FY24 vs LY Q1 Q2 H1
Group 18% 1% 10%
Asia Pacific 36% 2% 18%
EMEIA 17% 10% 14%
Americas -8% -10% -9%
Asia Pacific grew 18% in the half with a strong Q1 recovery of 36% against a
period that saw COVID-19 related disruption in Mainland China and slowed to 2%
in Q2 against a tougher comparative.
· Mainland China comparable store sales increased 15% in the half. Q2
fell 8% as spending shifted offshore with the Chinese customer group growing
25%
· South Korea fell 1% in the half with a robust 6% growth in Q1 offset
by a 7% decline in Q2
· Japan saw strong comparable store sales growth up 43% in the half and
41% in Q2 driven by tourists
· South Asia Pacific rose 30% in the half and 22% in Q2, also
benefitting from tourist demand
EMEIA had another strong half with comparable store sales up 14%, and Q2 +10%.
· The region benefitted from tourist growth of 39% for the half with
the share of mix from tourists increasing to 51% of retail sales with a strong
performance from American and Asian tourists
· Continental Europe outperformed the regional average in the half
· UK continued to lag Continental Europe in attracting tourism spend
compared with pre-pandemic levels, reflecting the withdrawal of VAT refunds in
the UK since January 2021
Americas declined 9% in the half with Q2 -10%.
· While the American customer has remained weak overall, we are pleased
with the progress made with our customer acquisition programme with an
increased share of higher income female clients
By product
We maintained our focus on our core leather and outerwear categories.
· Outerwear comparable store sales grew 21% in the half and 10% in Q2,
driven by Heritage rainwear following the launch of our new visual expression
of Burberry
· Leather goods comparable store sales grew 8% in the half and 3% in
Q2. This was driven by bags especially the Vintage Check line. The new bag
pillars launched at the end of the period and are gaining traction,
particularly the Knight bag and Trench tote
· Ready-to-wear excluding outerwear grew 6% in the half with men's up
6% and women's increasing 7%
Store footprint
The transformation of our distribution network continued during the half.
· Including refurbishments, we increased the number of updated stores
by 33 in the half, bringing the total of stores in new design to 140
· We remain on track to complete more than 50% of the network by the
end of this financial year
· Key openings/refurbishments include New Bond Street London, Rodeo
Drive Los Angeles and Omotesando Tokyo
· We are pleased with the performance of updated stores that saw both
store productivity and AUR higher by mid-teens compared with equivalent
existing stores
Wholesale
Wholesale revenue decreased 8% at both CER and reported rates in the half
driven by a weak Americas performance. We expect the full year to be down a
mid-single digit percentage with the channel impacted by the macroeconomic
environment.
Licensing
Licensing revenue grew 44% at CER and 45% at reported exchange rates in the
half driven by a strong performance in beauty with the highly successful
launch of the Burberry Goddess fragrance.
OPERATING PROFIT ANALYSIS
Adjusted operating profit
Period ended 26 weeks ended 26 weeks YoY % change YoY % change
£ million 30 September ended Reported FX CER
2023 1 October
2022
Revenue 1,396 1,345 4 7
Cost of sales* (421) (403) 4 6
Gross profit* 975 942 3 8
Gross margin %* 69.8% 70.1% (30bps) 30bps
Net operating expenses* (752) (704) 7 10
Operating expenses as a % of sales* 53.9% 52.4% 150bps 140bps
Adjusted operating profit* 223 238 (6) 1
Adjusted operating margin %* 15.9% 17.7% (180bps) (110bps)
*Excludes adjusting items
Adjusted operating profit increased 1% at CER and but fell 6% at reported with
the margin down 110bps and 180bps respectively:
· Gross margin increased by 30bps at CER with regional and channel mix
benefits as well as lower transportation costs more than offsetting
inflationary pressures, and fell 30bps at reported
· Adjusted net operating expenses rose by 10% at CER and 7% reported
due to investments in stores and marketing as well as impact of inflation of
people costs
· Adjusted operating profit was £223m at reported including a £17m
foreign exchange headwind (H1 FY23: £238m at reported with £31m foreign
exchange tailwind)
ADJUSTING ITEMS(*)
(Adjusting items were nil (H1 FY23: £25m net credit).)
Period ended 26 weeks ended 26 weeks ended
£ million 30 September 1 October
2023 2022
The impact of COVID-19
Inventory provisions** - 1
Rent concessions - 7
Government grants - 1
COVID-19 adjusting items - 9
Profit on sale of property - 19
Revaluation of deferred consideration liability - (2)
Restructuring costs - (1)
Adjusting items - 25
*For detail on adjusting items see note 4 of the Financial Statements
**Includes nil (H1 FY23: £1m credit) that has been recognised through COGS
ADJUSTED PROFIT BEFORE TAX*
After an adjusted net finance charge of £4m (H1 FY23: £12m), adjusted profit
before tax was £219m (H1 FY23: £226m).
*For detail on adjusting items see note 4 of the Financial Statements
TAXATION*
The effective tax rate on adjusted profit increased to 27.2% (H1 FY23: 22.4%)
due to the higher UK corporation tax rate. The reported tax rate on H1 FY24
profit before taxation was also 27.2% (H1 FY23: 22.7%).
*For detail see note 6 of the Financial Statements
CASH FLOW
Represented statement of cash flows
Period ended 26 weeks ended 26 weeks ended
£ million 30 September 1 October
2023 2022
Adjusted operating profit 223 238
Depreciation and amortisation 179 163
Working capital (154) (125)
Other including adjusting items 23 13
Cash generated from operating activities 271 289
Payment of lease principal and related cash flows (97) (93)
Capital expenditure (89) (53)
Proceeds from disposal of non-current assets - 22
Interest (2) (12)
Tax (98) (65)
Free cash flow* (15) 88
*For a definition of free cash flow see page 11
Free cash flow was a £15m outflow in the half (H1 FY23: £88m inflow) as we
continued to invest in product and distribution.
The major components were:
· Cash generated from operating activities decreased from £289m to
£271m
· A working capital outflow of £154m (H1 FY23: £125m) impacted by
changes to the timing of our seasonal collections and the build of inventory
in preparation for festive
· Capital expenditure of £89m (H1 FY23: £53m) attributed to the
store network as we continued to roll out our store refurbishment programme
· Tax cash outflow of £98m (H1 FY23: £65m) due to the higher UK
tax rate and one-off payments
Cash net of overdrafts on 30 September 2023 was £570m, compared to £961m on
1 April 2023. On 30 September 2023 borrowings were £299m from the bond issue
leaving cash net of overdrafts and borrowings of £271m (1 April 2023:
£663m). With lease liabilities of £1,158m, net debt in the period was £887m
(1 April 2023: £460m). Net Debt/Adjusted EBITDA was 0.9x, at the upper end of
our target range of 0.5x to 1.0x. The increase in leverage from 0.5x at the
FY23 year-end was primarily driven by the share buyback programme, payment of
the final dividend and seasonal working capital outflows as we approach the
festive period.
Period ended 26 weeks ended 26 weeks ended
£ million 30 September 1 October
2023 2022
Adjusted EBITDA - rolling 12 months 976 896
Cash net of overdrafts (570) (941)
Bond 299 298
Lease debt 1,158 1,139
Net Debt* 887 496
Net Debt/Adjusted EBITDA 0.9x 0.6x
*For a definition of net debt see page 12.
APPENDIX
Detailed guidance for FY24
Item Financial impact
Impact of retail space on revenues Space is expected to be broadly stable in FY24.
Wholesale revenue Wholesale revenue is expected to decline by a mid-single digit percentage in
FY24.
Tax We expect the adjusted effective tax rate to be around 27%.
Currency Based on 25 October effective foreign exchange rates, the impact of
year-on-year exchange rate movements is now expected to be a c.£110m headwind
on revenue and c.£60m headwind on adjusted operating profit.
Capex Capex is expected to be around £200m including over 50% of the store network
updated by end of the year.
Dividend Interim dividend at 18.3p, 30% of FY23 full year dividend - progressive
dividend policy with pay-out ratio around 50% of the full year.
Share buyback £400m share buyback completed on 31 October with 20.5m shares acquired at an
average price of 1,951p.
Note: Guidance based on CER at FY23 rates
GUIDANCE
We are confident in our strategy and remain committed to achieving our medium
and long-term targets. The slowdown in luxury demand globally is having an
impact on current trading. If the weaker demand continues, we are unlikely to
achieve our previously stated revenue guidance for FY24*. In this context,
adjusted operating profit would be towards the lower end of the current
consensus range (£552m-£668m)**.
Based on effective foreign exchange rates as of 25 October 2023, we now expect
a reduced currency headwind of c.£110m to revenue and c.£60m to adjusted
operating profit.
*High single-digit revenue CAGR from FY20 base equating to a low double-digit
growth in FY24
** As published on our corporate website here
(https://www.burberryplc.com/investors/consensus) .
Retail/wholesale revenue by destination*
Period ended 26 weeks ended 30 September 26 weeks ended YoY % change
1 October
£ million 2023 2022 Reported FX CER
Asia Pacific (94% retail)* 584 525 11 19
EMEIA (68% retail)* 485 445 9 8
Americas (83% retail)* 296 354 (16) (14)
Total (82% retail) 1,365 1,324 3 7
*Mix based on H1 FY24
Retail/wholesale revenue by product division
Period ended 26 weeks ended 30 September 26 weeks ended YoY % change
1 October
£ million 2023 2022 Reported FX CER
Accessories 498 495 1 4
Women's 391 357 9 13
Men's 399 383 4 8
Children's & other 77 89 (13) (10)
Total 1,365 1,324 3 7
Store portfolio*
Directly operated stores
Stores Concessions Outlets Total Franchise stores
At 1 April 2023 219 138 56 413 35
Additions 7 1 2 10 2
Closures (10) (4) - (14) (5)
At 30 September 2023 216 135 58 409 32
*Excludes the impact of pop-up stores
Store portfolio by region*
Directly operated stores
Stores Concessions Outlets Total Franchise stores
At 30 September 2023
Asia Pacific 113 94 24 231 8
EMEIA 44 33 19 96 24
Americas 59 8 15 82 -
Total 216 135 58 409 32
*Excludes the impact of pop-up stores
Adjusted operating profit* 26 weeks ended 26 weeks ended % change % change
30 September 2023
Period ended 1 October Reported FX CER
£ millions 2022
Retail/wholesale 194 219 (11) (3)
Licensing 29 19 46 45
Adjusted operating profit 223 238 (6) 1
Adjusted operating profit margin 15.9% 17.7% (180bps) (110bps)
*For detail on adjusting items see note 4 of the Financial Statements
Exchange rates Forecast effective average rates for FY24 Actual average exchange rates
25 October 2023 29 June 2023 H1 FY24 H1 FY23 FY23
£1=
Euro 1.15 1.16 1.16 1.17 1.16
US Dollar 1.23 1.26 1.26 1.21 1.20
Chinese Renminbi 8.91 9.07 8.97 8.16 8.27
Hong Kong Dollar 9.65 9.87 9.86 9.50 9.43
Korean Won 1,694 1,659 1,654 1,579 1,577
Profit before tax reconciliation
Period ended 26 weeks ended 26 weeks ended % change % change
30 September 2023
£ million 1 October Reported FX CER
2022
Adjusted profit before tax 219 226 (3) 4
Adjusting items*
COVID-19 related items - 9
Profit on sale of property - 19
Restructuring costs - (1)
Revaluation of deferred consideration liability - (2)
Profit before tax 219 251 (13)
*For detail on adjusting items see note 4 of the Financial Statements
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 external reporting purposes.
APM Description and purpose GAAP measure reconciled to
Constant Exchange Rates (CER) This measure removes the effect of changes in exchange rates. The constant Results at reported rates
exchange rate incorporates both the impact of the movement in exchange rates
on the translation of overseas subsidiaries' results and on foreign currency
procurement and sales through the Group's UK supply chain.
Comparable sales growth The year-on-year change in sales from stores trading over equivalent time Retail Revenue:
periods and measured at constant foreign exchange rates. It also includes
online sales. This measure is used to strip out the impact of permanent store
openings and closings, or those closures relating to refurbishments, allowing
Period ended 26 weeks 26 weeks ended
a comparison of equivalent store performance against the prior period.
YoY% ended 1 October
30 September 2022
2023
Comparable sales growth 10% 5%
Change in space 0% 1%
CER retail 10% 6%
FX (4%) 6%
Retail revenue 6% 12%
Adjusted Profit Adjusted profit measures are presented to provide additional consideration of Reported Profit:
the underlying performance of the Group's ongoing business. These measures
remove the impact of those items which should be excluded to provide a A reconciliation of reported profit before tax to adjusted profit before tax
consistent and comparable view of performance. and the Group's accounting policy for adjusted profit before tax are set out
in the financial statements.
Free Cash Flow Free cash flow is defined as net cash generated from operating activities less Net cash generated from operating activities:
capital expenditure plus cash inflows from disposal of fixed assets and
Period ended 26 weeks ended 26 weeks ended
including cash outflows for lease principal payments and other lease related
items.
£m 30 September 1 October
2023 2022
Net cash generated from operating activities 171 212
Capex (89) (53)
Lease principal and related cash flows (97) (93)
Proceeds from disposal of non-current assets - 22
Free cash flow (15) 88
Adjusted Profit
Adjusted profit measures are presented to provide additional consideration of
the underlying performance of the Group's ongoing business. These measures
remove the impact of those items which should be excluded to provide a
consistent and comparable view of performance.
Reported Profit:
A reconciliation of reported profit before tax to adjusted profit before tax
and the Group's accounting policy for adjusted profit before tax are set out
in the financial statements.
Free Cash Flow
Free cash flow is defined as net cash generated from operating activities less
capital expenditure plus cash inflows from disposal of fixed assets and
including cash outflows for lease principal payments and other lease related
items.
Net cash generated from operating activities:
Period ended 26 weeks ended 26 weeks ended
£m 30 September 1 October
2023 2022
Net cash generated from operating activities 171 212
Capex (89) (53)
Lease principal and related cash flows (97) (93)
Proceeds from disposal of non-current assets - 22
Free cash flow (15) 88
Cash Conversion Cash conversion is defined as free cash flow pre-tax/adjusted profit before Net cash generated from operating activities:
tax. It provides a measure of the Group's effectiveness in converting its Period ended 26 weeks 26 weeks
profit into cash.
£m ended ended
30 September 1 October
2023 2022
Free cash flow (15) 88
Tax paid 98 65
Free cash flow before tax 83 153
Adjusted profit before tax 219 226
Cash conversion 38% 68%
Net Debt Net debt is defined as the lease liability recognised on the balance sheet Cash net of overdrafts:
plus borrowings less cash net of overdrafts.
Period ended As at As at
£m 30 September 1 October
2022
2023
Cash net of overdrafts 570 941
Lease liability (1,158) (1,139)
Borrowings (299) (298)
Net debt (887) (496)
Adjusted EBITDA Adjusted EBITDA is defined as operating profit, excluding adjusting operating Reconciliation from operating profit to adjusted EBITDA:
items, depreciation of property, plant and equipment, depreciation of right of
Period ended 26 weeks 26 weeks ended
use assets and amortisation of intangible assets. Any depreciation or
amortisation included in adjusting operating items are not double counted. ended
Adjusted EBITDA is shown for the calculation of Net Debt/EBITDA for our
leverage ratios. £m
1 October
30 September
2022
2023
Operating profit 223 263
Adjusting operating items - (25)
Amortisation of intangible assets 19 18
Depreciation of property, plant and equipment 49 45
Depreciation of right-of-use assets 111 100*
Adjusted EBITDA 402 401
*Excludes £3m depreciation on right-of-use assets included in adjusting items
Net Debt
Net debt is defined as the lease liability recognised on the balance sheet
plus borrowings less cash net of overdrafts.
Cash net of overdrafts:
Period ended As at As at
£m 30 September 1 October
2022
2023
Cash net of overdrafts 570 941
Lease liability (1,158) (1,139)
Borrowings (299) (298)
Net debt (887) (496)
Adjusted EBITDA
Adjusted EBITDA is defined as operating profit, excluding adjusting operating
items, depreciation of property, plant and equipment, depreciation of right of
use assets and amortisation of intangible assets. Any depreciation or
amortisation included in adjusting operating items are not double counted.
Adjusted EBITDA is shown for the calculation of Net Debt/EBITDA for our
leverage ratios.
Reconciliation from operating profit to adjusted EBITDA:
Period ended 26 weeks 26 weeks ended
ended
£m
1 October
30 September
2022
2023
Operating profit 223 263
Adjusting operating items - (25)
Amortisation of intangible assets 19 18
Depreciation of property, plant and equipment 49 45
Depreciation of right-of-use assets 111 100*
Adjusted EBITDA 402 401
*Excludes £3m depreciation on right-of-use assets included in adjusting items
PRINCIPAL RISKS
At H1 FY24, the principal risks the Group faces for the remaining 26 weeks of
the financial year have been reviewed relative to the prior year-end. The
principal risk ratings are considered to be consistent with the year-end
position. Details of the principal risks including definitions are set out in
the FY23 Annual Report (p121- 144).
CONDENSED Group INCOME statement- UNAUDITED
Note 26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022
2023(1)
£m
£m
Revenue 3 1,396 1,345 3,094
Cost of sales (421) (402) (911)
Gross profit 975 943 2,183
Operating expenses (758) (712) (1,572)
Other operating income 6 32 46
Net operating expenses (752) (680) (1,526)
Operating profit 223 263 657
Financing
Finance income 20 6 21
Finance expense (24) (18) (42)
Other financing charge - - (2)
Net finance expense 5 (4) (12) (23)
Profit before taxation 219 251 634
Taxation 6 (60) (57) (142)
Profit for the period 159 194 492
Attributable to:
Owners of the Company 158 193 490
Non-controlling interest 1 1 2
Profit for the period 159 194 492
Earnings per share
Basic 7 42.4p 49.1p 126.9p
Diluted 7 42.1p 48.9p 126.3p
£m £m £m
Reconciliation of adjusted profit before taxation:
Profit before taxation 219 251 634
Adjusting operating items:
Cost of sales (income) 4 - (1) (1)
Net operating expense (income) 4 - (24) (22)
Adjusting financing items 4 - - 2
Adjusted profit before taxation - non-GAAP measure 219 226 613
Adjusted earnings per share - non-GAAP measure
Basic 7 42.4p 44.5p 123.1p
Diluted 7 42.1p 44.3p 122.5p
Dividends per share
Proposed interim (not recognised as a liability at period end) 8 18.3p 16.5p 16.5p
Final (not recognised as a liability at 1 April 2023) 8 N/A N/A 44.5p
(1) Balances for the 52 weeks to 1 April 2023 have been audited.
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED
26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022 2023(1)
£m £m
Profit for the period 159 194 492
Other comprehensive income(2):
Cash flow hedges (1) 1 1
Foreign currency translation differences (16) 53 14
Tax on other comprehensive income: - (1) (1)
Other comprehensive income for the period, net of tax (17) 53 14
Total comprehensive income for the period 142 247 506
Total comprehensive income attributable to:
Owners of the Company 141 245 504
Non-controlling interest 1 2 2
142 247 506
(1) Balances for the 52 weeks to 1 April 2023 have been audited.
(2) All items included in other comprehensive income may subsequently be
reclassified to profit and loss in a future period.
CONDENSED GROUP BALANCE SHEET - UNAUDITED
Note As at As at As at
30 September 2023 1 October 1 April
£m
2022
2023(1)
£m
£m
ASSETS
Non-current assets
Intangible assets 9 248 245 248
Property, plant and equipment 10 377 345 376
Right-of-use assets 11 972 947 950
Deferred tax assets 6 204 204 197
Trade and other receivables 12 52 53 52
1,853 1,794 1,823
Current assets
Inventories 13 526 484 447
Trade and other receivables 12 365 338 307
Derivative financial assets 1 3 7
Income tax receivables 87 87 76
Cash and cash equivalents 14 663 1,017 1,026
Assets held for sale 10 13 11 -
1,655 1,940 1,863
Total assets 3,508 3,734 3,686
LIABILITIES
Non-current liabilities
Trade and other payables 15 (70) (84) (76)
Lease liabilities (922) (922) (902)
Borrowings 18 (299) (298) (298)
Deferred tax liabilities 6 - (1) (1)
Retirement benefit obligations (1) (1) (1)
Provisions for other liabilities and charges 16 (35) (40) (40)
(1,327) (1,346) (1,318)
Current liabilities
Trade and other payables 15 (672) (498) (477)
Bank overdrafts 17 (93) (76) (65)
Lease liabilities (236) (217) (221)
Derivative financial liabilities (10) (5) (1)
Income tax liabilities (31) (34) (43)
Provisions for other liabilities and charges 16 (22) (27) (22)
(1,064) (857) (829)
Total liabilities (2,391) (2,203) (2,147)
Net assets 1,117 1,531 1,539
EQUITY
Capital and reserves attributable to owners of the Company
Ordinary share capital 19 - - -
Share premium account 230 228 230
Capital reserve 41 41 41
Hedging reserve 3 5 4
Foreign currency translation reserve 216 269 232
Retained earnings 620 982 1,026
Equity attributable to owners of the Company 1,110 1,525 1,533
Non-controlling interest in equity 7 6 6
Total equity 1,117 1,531 1,539
(1) Balances as at 1 April 2023 have been audited.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY - UNAUDITED
Attributable to owners
of the Company
Note Ordinary share capital Share premium account Other reserves Retained earnings Total Non-controlling interest Total equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 2 April 2022 - 227 263 1,123 1,613 4 1,617
Profit for the period - - - 193 193 1 194
Other comprehensive income:
Cash flow hedges - - 1 - 1 - 1
Foreign currency translation differences - - 52 - 52 1 53
Tax on other comprehensive income - - (1) - (1) - (1)
Total comprehensive income for the period - - 52 193 245 2 247
Transactions with owners:
Employee share incentive schemes
Equity share awards - - - 10 10 - 10
Equity share awards transferred to liabilities - - - (2) (2) - (2)
Exercise of share options - 1 - - 1 - 1
Purchase of own shares
Share buy-back - - - (201) (201) - (201)
Held by ESOP trusts - - - (1) (1) - (1)
Dividends paid in the period - - - (140) (140) - (140)
Balance as at 1 October 2022 - 228 315 982 1,525 6 1,531
Balance as at 1 April 2023 - 230 277 1,026 1,533 6 1,539
Profit for the period - - - 158 158 1 159
Other comprehensive income:
Cash flow hedges - - (1) - (1) - (1)
Foreign currency translation differences - - (16) - (16) - (16)
Total comprehensive income for the period - - (17) 158 141 1 142
Transactions with owners:
Employee share incentive schemes
Equity share awards - - - 7 7 - 7
Tax on share awards - - - (2) (2) - (2)
Purchase of own shares
Share buy-back(1) 19 - - - (402) (402) - (402)
Dividends paid in the period 8 - - - (167) (167) - (167)
Balance as at 30 September 2023 - 230 260 620 1,110 7 1,117
(1) Includes £201 million paid in relation to the first share buy-back
programme which commenced and completed in period as well as £201 million
included within payables related to the second share buy-back programme which
commenced in the period and completed in the second half of the year. Refer to
note 19.
CONDENSED GROUP STATEMENT OF CASH FLOWS - UNAUDITED
Note 26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2023(1)
2022
£m
£m
Cash flows from operating activities
Profit before tax 219 251 634
Adjustments to reconcile profit before tax to net cash flows:
Amortisation of intangible assets 19 18 37
Depreciation of property, plant and equipment 49 45 95
Depreciation of right-of-use assets 111 100 212
COVID-19 related rent concessions - (7) (13)
Net impairment charge of property, plant and equipment 10 - - 2
Net impairment (reversal)/charge of right-of-use assets 11 - (1) 2
Loss/(gain) on disposal of property, plant and equipment and intangible assets 3 (19) (19)
Gain on modification of right-of-use assets (1) - (2)
Loss/(gain) on derivative instruments 14 5 (2)
Charge in respect of employee share incentive schemes 7 10 19
Net finance expense 4 12 23
Working capital changes:
Increase in inventories (76) (46) (10)
Increase in receivables (58) (53) (17)
Decrease in payables and provisions (20) (26) (49)
Cash generated from operating activities 271 289 912
Interest received 21 5 18
Interest paid (23) (17) (40)
Taxation paid (98) (65) (140)
Net cash generated from operating activities 171 212 750
Cash flows from investing activities
Purchase of property, plant and equipment (64) (35) (136)
Purchase of intangible assets (25) (18) (43)
Proceeds from sale of property, plant and equipment - 22 32
Initial direct costs of right-of-use assets (1) - -
Net cash outflow from investing activities (90) (31) (147)
Cash flows from financing activities
Dividends paid in the period (167) (140) (203)
Payment of deferred consideration for acquisition of non-controlling interest 15 - (6) (6)
Payment of lease principal (96) (93) (210)
Issue of ordinary share capital - 1 3
Purchase of own shares through share buy-back (200) (180) (400)
Purchase of own shares through share buy-back - stamp duty and fees (1) (1) (4)
Purchase of own shares by ESOP trusts - (1) (1)
Net cash outflow from financing activities (464) (420) (821)
Net decrease in cash net of overdrafts (383) (239) (218)
Effect of exchange rate changes (8) 3 2
Cash net of overdrafts at beginning of period 961 1,177 1,177
Cash net of overdrafts 570 941 961
Cash and cash equivalents 14 663 1,017 1,026
Bank overdrafts 17 (93) (76) (65)
Cash net of overdrafts 570 941 961
(1) Balances for the 52 weeks to 1 April 2023 have been audited.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Corporate information
Burberry Group plc and its subsidiaries (the Group) is a global luxury goods
manufacturer, retailer and wholesaler. The Group also licenses third parties
to manufacture and distribute products using the 'Burberry' trademarks. All of
the companies which comprise the Group are controlled by Burberry Group plc
(the Company) directly or indirectly.
2. Accounting policies and Basis of preparation
Basis of preparation
These condensed consolidated interim financial statements are unaudited but
have been reviewed by the auditors and their report to the Company is set out
on page 36. They were approved by the Board of Directors on 15 November 2023.
These condensed consolidated interim financial statements do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the 52 weeks to 1 April 2023 were approved by the
Board of Directors on 17 May 2023 and have been filed with the Registrar of
Companies. The report of the auditors on the statutory accounts for the 52
weeks to 1 April 2023 was unqualified and did not contain a statement under
Section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements for the 26 weeks to
30 September 2023 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Services Authority and with
IAS 34, 'Interim Financial Reporting' as adopted by the UK. This report should
be read in conjunction with the Group's financial statements for the 52 weeks
to 1 April 2023, which have been prepared in accordance with UK-adopted
International Accounting Standards (IFRS).
These condensed consolidated interim financial statements are presented in
£m. Financial ratios are calculated using unrounded numbers.
Going concern
In considering the appropriateness of adopting the going concern basis in
preparing the financial statements, the Directors have assessed the potential
cash generation of the Group. This assessment covers the period of a minimum
of 12 months from the date of signing the condensed consolidated interim
financial statements. Therefore, the Directors have considered the forecast
for the period up to the subsequent financial year end, the period ending 29
March 2025, for any indicators that the going concern basis of preparation is
not appropriate.
The scenarios considered by the Directors include a severe but plausible
downside reflecting the Group's base plan adjusted for severe but plausible
impacts from the Group's principal risks, which are consistent with the
principal risks at 1 April 2023. The scenarios were informed by a
comprehensive review of macroeconomic scenarios using third party projections
of macroeconomic data for the luxury fashion industry. The Group central
planning scenario reflects a balanced projection with a continued focus on
growing markets and maintaining momentum built as part of the strategy. As a
sensitivity, this central planning scenario has been flexed to reflect a 15%
downgrade to revenues in the 18 month period to March 2025, in comparison to
the base case, as well as the associated consequences for EBITDA and cash.
Management consider this represents a severe but plausible downside scenario
appropriate for assessing going concern.
The severe but plausible downside modelled the following risks occurring
simultaneously:
• A more severe and prolonged reduction in the GDP growth
assumptions in Europe, China, and the Americas compared to the central
planning scenario
• An increase in geopolitical tension which reduces GDP
growth assumptions compared to the central planning model
• A severe reduction to our global consumer demand arising
from a change in consumer preference
• A significant reputational incident such as negative
sentiment propagated through social media
• The impact of a business interruption event, following a
technology vulnerability, resulting in a two week interruption in one of our
geographies arising from the supply chain impact, and interruption to one of
our channels
• The occurrence of a one-time physical risk relating to
climate change in FY 2024/25 and the materialisation of a severe but plausible
ongoing market risk relating to climate change in line with a scenario
reflecting a 2°C global temperature increase compared to pre-industrial
levels
• The payment of a settlement arising from a regulatory or
compliance-related matter
• A short term impact of a 10% weakening in a key
non-sterling currency for the Group before it is recovered through price
adjustment
Further mitigating actions within management control would be taken under the
severe but plausible scenario, including working capital reduction measures
and limiting capital expenditure or inorganic acquisition spend, but these
were not incorporated into the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As at 30 September 2023, the Group balance sheet reflects cash net
of overdrafts is £570 million. In addition the Group has access to a £300
million Revolving Credit Facility (RCF), which is currently undrawn and not
relied upon for the purpose of this going concern assessment. The Group is in
compliance with the covenants for the RCF and the borrowings raised via the
sustainability bond are not subject to covenants. Details of cash, overdrafts,
borrowings and facilities are set out in notes 14, 17 and 18 of these
financial statements.
In all the scenarios assessed, taking into account liquidity and available
resources and before the inclusion of any mitigating actions within management
control, the Group was able to maintain sufficient liquidity to continue
trading, having considered the going concern period up to 29 March 2025. On
the basis of the assessment performed, the Directors consider it is
appropriate to continue to adopt the going concern basis in preparing the
condensed consolidated interim financial statements for the period ended 30
September 2023.
Accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those followed
in the preparation of the Group's annual consolidated financial statements for
the 52 weeks ended 1 April 2023.
Several standards and amendments apply for the first time for the period ended
30 September 2023, but do not have a material impact on the condensed
consolidated interim financial statements of the Group. The Group has not
early adopted any standard, interpretation or amendment that has been issues
but is not yet effective.
Key sources of estimation uncertainty
Preparation of the condensed consolidated interim financial statements in
conformity with IFRS requires that management make certain estimates
and assumptions that affect the measurement of reported revenues, expenses,
assets and liabilities and the disclosure of contingent liabilities.
If in the future such estimates and assumptions, which are based on
management's best estimates at the date of the financial statements, deviate
from actual circumstances, the original estimates and assumptions will be
updated as appropriate in the period in which the circumstances change.
Estimates are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be
reasonable under the circumstances. The key areas where the estimates and
assumptions applied have a significant risk of causing a material adjustment
to the carrying value of assets and liabilities are consistent with those
applied in the Group's financial statements for the 52 weeks to 1 April 2023,
as set out on pages 271 to 272 of those financial statements.
There have been no changes to the significant estimates relating to
impairment, or reversal of impairment, of property plant and equipment and
right-of-use assets, inventory provisioning or uncertain tax positions in the
period.
Key judgements in applying the Group's accounting policies
Judgements are those decisions made when applying accounting policies which
have a significant impact on the amounts recognised in the Group's financial
statements. Key judgements that have a significant impact on the amounts
recognised in the condensed consolidated interim financial statements for the
26 weeks to 30 September 2023 and the 26 weeks to 1 October 2022 are as
follows:
Where the Group is a lessee, judgement is required in determining the lease
term at initial recognition, and throughout 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 have
been no significant judgements in relation to lease term made in the period.
Refer to note 23 for details of a significant judgement made in relation to
lease term after the balance sheet date.
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 average exchange rate for
the month, weighted according to the phasing of the Group's trading results.
The average exchange rate is used, as it is considered to approximate the
actual exchange rates on the dates of the transactions. The assets and
liabilities of such undertakings are translated at the closing rates.
Differences arising on the retranslation of the opening net investment in
subsidiary companies, and on the translation of their results, are recognised
in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
The principal exchange rates used were as follows:
Average rate Closing rate
26 weeks to 26 weeks to 52 weeks to As at As at As at
30 September 2023 1 October 1 April 30 September 2023 1 October 1 April
2022
2023
2023
2022
Euro 1.16 1.17 1.16 1.15 1.14 1.14
US Dollar 1.26 1.21 1.20 1.22 1.12 1.24
Chinese Yuan Renminbi 8.97 8.16 8.27 8.90 7.95 8.51
Hong Kong Dollar 9.87 9.50 9.43 9.56 8.76 9.73
Korean Won 1,654 1,579 1,577 1,646 1,598 1,613
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/or material in nature as well as
income or expenses relating to acquisitions or disposals of businesses or
other transactions of a similar nature, including the impact of changes in
fair value of expected future payments or receipts relating to these
transactions. Adjusting items are identified and presented on a consistent
basis each year and a reconciliation of adjusted PBT to profit before tax is
included in the financial statements. Adjusting items and their related tax
impacts, as well as adjusting taxation items, are added back to/deducted from
profit attributable to owners of the Company to arrive at adjusted earnings
per share. Refer to note 4 for further details of adjusting items.
3. Segmental analysis
The Chief Operating Decision Maker has been identified as the Board of
Directors. The Board reviews the Group's internal reporting in order to
assess performance and allocate resources. Management has determined the
operating segments based on the reports used by the Board. The Board
considers the Group's business through its two channels to market, being
retail/wholesale and licensing.
Retail/wholesale revenues are generated by the sale of luxury goods through
Burberry mainline stores, concessions, outlets and digital commerce as well as
Burberry franchisees, prestige department stores globally and multi-brand
specialty accounts. The flow of global product between retail and wholesale
channels and across our regions is monitored and optimised at a corporate
level and implemented via the Group's inventory hubs and principal
distribution centres situated in Europe, the US, Mainland China and Hong Kong
S.A.R. China.
Licensing revenues are generated through the receipt of royalties from global
licensees of beauty products, eyewear and from licences relating to the use of
non-Burberry trademarks in Japan.
The Board assesses channel performance based on a measure of adjusted
operating profit. This measurement basis excludes the effects of adjusting
items. The measure of earnings for each operating segment that is reviewed by
the Board includes an allocation of corporate and central costs. Interest
income and charges are not included in the result for each operating segment
that is reviewed by the Board.
Retail/Wholesale Licensing Total
26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to
30 September 2023 1 October 30 September 2023 1 October 30 September 2023 1 October
£m
2022
£m
2022
£m
2022
£m
£m
£m
Retail 1,124 1,061 - - 1,124 1,061
Wholesale 241 263 - - 241 263
Licensing - - 32 22 32 22
Total segment revenue 1,365 1,324 32 22 1,397 1,346
Inter-segment revenue(1) - - (1) (1) (1) (1)
Revenue from external customers 1,365 1,324 31 21 1,396 1,345
Adjusted operating profit 194 219 29 19 223 238
Adjusting items(2) - 25
Finance income 20 6
Finance expense (24) (18)
Profit before taxation 219 251
Retail/Wholesale Licensing Total
52 weeks to 1 April 2023 £m £m £m
Retail 2,501 - 2,501
Wholesale 543 - 543
Licensing - 51 51
Total segment revenue 3,044 51 3,095
Inter-segment revenue(1) - (1) (1)
Revenue from external customers 3,044 50 3,094
Adjusted operating profit 587 47 634
Adjusting items(2) 21
Finance income 21
Finance expense (42)
Profit before taxation 634
1. Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would be available to unrelated third
parties.
2. Refer to note 4 for details of adjusting items.
Additional revenue analysis
All revenue is derived from contracts with customers. The Group derives Retail
and Wholesale revenue from contracts with customers from the transfer of goods
and related services at a point in time. Licensing revenue is derived over the
period the licence agreement gives the customer access to the Group's
trademarks.
Revenue by product division 26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022
2023
£m
£m
Accessories 498 495 1,125
Women's 391 357 867
Men's 399 383 868
Children's/Other 77 89 184
Retail/Wholesale 1,365 1,324 3,044
Licensing 31 21 50
Total 1,396 1,345 3,094
Revenue by destination 26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022
2023
£m
£m
Asia Pacific 584 525 1,297
EMEIA(1) 485 445 1,004
Americas 296 354 743
Retail/Wholesale 1,365 1,324 3,044
Licensing 31 21 50
Total 1,396 1,345 3,094
1. EMEIA comprises Europe, Middle East, India and Africa.
Due to the seasonal nature of the business, Group revenue is usually expected
to be higher in the second half of the year than in the first half. While some
of the Group's operating costs are also higher in the second half of the year,
such as contingent rentals and sales related employee costs, most of the
operating costs, in particular salaries and fixed rentals, are phased more
evenly across the year. As a result, adjusted operating profit is expected to
be higher in the second half of the financial year.
4. Adjusting items
26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022
2023
£m
£m
Adjusting items
Adjusting operating items
Impact of COVID-19:
Impairment reversal relating to retail cash generating units - - (6)
Impairment reversal relating to inventory - (1) (1)
COVID-19 related rent concessions - (7) (13)
COVID-19 related government grant income - (1) (2)
Other adjusting items:
Gain on disposal of property - (19) (19)
Restructuring costs - 1 16
Revaluation of deferred consideration liability - 2 2
Total adjusting operating items (pre-tax) - (25) (23)
Adjusting financing items
Finance charge on adjusting items - - 2
Total adjusting financing items (pre-tax) - - 2
Tax on adjusting items - 6 6
Total adjusting items (post-tax) - (19) (15)
26 weeks to 26 weeks to 52 weeks to
30 September 2023 1 October 1 April
£m
2022
2023
£m
£m
Analysis of adjusting operating items:
Included in Cost of sales (Impairment reversal relating to inventory) - (1) (1)
Included in Operating expenses - 3 12
Included in Other operating income - (27) (34)
Total adjusting operating items - (25) (23)
No adjusting items have been recorded for the 26 weeks to 30 September 2023.
Adjusting items related to prior periods were as follows:
Impact of COVID-19
Impairment of retail cash generating units
During the 52 weeks to 1 April 2023, a net impairment reversal of £6 million,
and an associated tax charge of £1 million, was recorded following the
reassessment of the COVID related impairment provision. Any charges or
reversals from the reassessment of the original impairment adjusting item, had
they arisen, would have been included in this adjusting item. Refer to note 10
for details of impairment consideration of retail cash generating units.
Impairment of inventory
During the 26 weeks to 1 October 2022 and the 52 weeks to 1 April 2023,
reversals of inventory provisions of £1 million were recorded and presented
as adjusting items. This was relating to inventory which had been provided for
as an adjusting item at the previous year end and had either been sold, or was
expected to be sold, at a higher net realisable value than had been assumed
when the provision had been initially estimated. All other charges and
reversals relating to inventory provisions have been recorded in adjusted
operating profit.
COVID-19-related rent concessions
Eligible rent forgiveness amounts relating to COVID-19 were treated as
negative variable lease payments, which resulted in a credit of £7 million
for the 26 weeks to 1 October 2022 and £13 million for the 52 weeks to 1
April 2023 recorded in other operating income. This income was presented as an
adjusting item given that the amendment to IFRS 16 was only applicable for a
limited period of time and it explicitly related to COVID-19. The amendment
expired on 30 June 2022 however the Group continued to apply the same
accounting treatment applying the principles of IFRS 9 for any ongoing
COVID-19 related rent forgiveness. A related tax charge of £1 million and £3
million was also recognised in the last half year and full year respectively.
COVID-19-related government grant income
The Group recorded grant income of £1 million for the 26 weeks to 1 October
2022 and £2 million for the 52 weeks to 1 April 2023 relating to government
support to alleviate the impact of COVID-19 within other operating income.
This income was presented as an adjusting item as it was explicitly related to
COVID-19, and the arrangements were expected to last for a limited period of
time. A related tax charge of £nil and £1 million was also recognised in the
last half year and full year respectively.
Other adjusting items
Gain on disposal of property
During the 26 weeks to 1 October 2022, the Group completed the sale of an
owned property in the US for cash proceeds of £22 million resulting in a net
gain on disposal of £19 million, recorded within other operating income. The
net gain on disposal was recognised as an adjusting item, in accordance with
the Group's accounting policy, as it was considered to be material and one-off
in nature. A related tax charge of £5 million was also recognised in the last
half year and full year.
Restructuring costs
During the 26 weeks to 1 October 2022, restructuring costs of £1 million
(last full year: £16 million) were incurred, arising primarily as a result of
the organisational efficiency programme announced in July 2020, which
completed last year, that included the creation of three new business units to
enhance product focus, increase agility and elevate quality and to further
streamline of office-based functions and facilities. The costs principally
related to impairment charges on non-retail assets and redundancies and were
recorded in operating expenses. They were presented as an adjusting item, in
accordance with the Group's accounting policy, as the cost of the
restructuring programme was considered material and discrete in nature. A
related tax credit of £nil and £4 million was also recognised in the last
half year and full year respectively.
Items relating to the deferred consideration liability
On 22 April 2016, the Group entered into an agreement to transfer the economic
right of the non-controlling interest in Burberry Middle East LLC to the Group
in exchange for consideration of contingent payments to be made to the
minority shareholder over the period ending 30 March 2024.
No charge in relation to the revaluation of this balance has been recognised
in operating expenses for the 26 weeks to 30 September 2023 (last half year:
£2 million; last full year: £2 million). No tax was recognised as the future
payments are not considered to be deductible for tax purposes. This was
presented as an adjusting item in accordance with the Group's accounting
policy, as it arose from changes in the value of the liability for expected
future payments relating to the purchase of a non-controlling interest in the
Group.
5. Financing
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 2022 1 April
2023
2023
£m £m
£m
Finance income - amortised cost 4 1 3
Bank interest income - fair value through profit and loss 16 5 18
Finance income 20 6 21
Interest expense on lease liabilities (19) (14) (31)
Interest expense on overdrafts (2) - (2)
Interest expense on borrowings (2) (2) (4)
Bank charges (1) (1) (1)
Other finance expense - (1) (4)
Finance expense (24) (18) (42)
Finance charge on adjusting items - - (2)
Net finance expense (4) (12) (23)
6. Taxation
The Group's adjusted effective tax rate is 27.2% (last half year: 22.4%) and
the reported effective tax rate is 27.2% (last half year: 22.7%). The increase
in the effective tax rate primarily reflects the impact of the increase in the
UK tax rate which took effect from 1 April 2023.
The Group expects the adjusted effective tax rate for the year ended 30 March
2024 to be around 27%. The effective tax rate is sensitive to the geographic
mix of profits. The rate is also sensitive to future legislative changes
affecting international businesses such as changes arising from the OECD's
(Organisation for Economic Co-operation and Development) Base Erosion and
Profits Shifting (BEPS) work. On 20 June 2023, Finance (No.2) Act 2023 was
substantively enacted in the UK, introducing a global minimum effective tax
rate of 15%. The legislation implements a domestic top-up tax and a
multinational top-up tax, which will apply to the Group for the period ending
29 March 2025. The Group has applied the exception under IAS 12 to recognising
and disclosing information about deferred tax assets and liabilities related
to top-up income taxes.
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 2022 1 April
2023
2023
£m £m
£m
Current tax
Current tax on income for the period 74 69 150
Double taxation relief (1) - (5)
Adjustments in respect of prior years 2 2 15
Total current tax 75 71 160
Deferred tax
Origination and reversal of temporary differences (15) (15) (22)
Adjustments in respect of prior years - 1 4
Total deferred tax (15) (14) (18)
Total tax charge on profit 60 57 142
Total taxation recognised in the condensed group income statement comprises:
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Tax on adjusted profit before taxation 60 51 136
Tax on adjusting items (note 4) - 6 6
Total taxation charge 60 57 142
Deferred taxation
The major deferred tax assets/(liabilities) recognised by the Group and
movements during the period are as follows:
Net deferred tax asset
£m
Balance as at 1 April 2023 196
Effect of foreign exchange rates (5)
Credited to the Income Statement 15
Charged to Equity (2)
Balance as at 30 September 2023 204
Balance as at 1 October 2022 203
The most significant deferred tax asset recognised for the period relates to
the provision for unrealised profit on stock sold intragroup.
7. Earnings per share
The calculation of basic earnings per share is based on profit or loss
attributable to owners of the Company for the period divided by the weighted
average number of ordinary shares in issue during the period. Basic and
diluted earnings per share based on adjusted profit before taxation are also
disclosed to indicate the underlying profitability of the Group.
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Attributable profit for the period before adjusting items(1) 158 174 475
Effect of adjusting items(1) (after taxation) - 19 15
Attributable profit for the period 158 193 490
1. Refer to note 4 for details of adjusting items.
The weighted average number of ordinary shares represents the weighted average
number of Burberry Group plc ordinary shares in issue throughout the period,
excluding ordinary shares held in the Group's ESOP trusts and treasury shares
held by the Company or its subsidiaries. This includes the effect of the
cancellation of 9.3 million shares during the period (last half year: 9.8
million; last full year: 21.1 million) as a result of the share buy-back
programmes. Refer to note 19 for additional information on the share
buy-backs.
Diluted earnings per share is based on the weighted average number of ordinary
shares in issue during the period. In addition, account is taken of any
options and awards made under the employee share incentive schemes, which will
have a dilutive effect when exercised.
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 2022 1 April
2023
2023
Millions Millions
Millions
Weighted average number of ordinary shares in issue during the period 373.1 392.9 386.1
Dilutive effect of the employee share incentive schemes 3.0 1.5 1.9
Diluted weighted average number of ordinary shares in issue during the period 376.1 394.4 388.0
26 weeks to 26 weeks to 52 weeks to
30 September 1 October 1 April
2023
2023
Pence 2022
Pence
Pence
Earnings per share
Basic 42.4 49.1 126.9
Diluted 42.1 48.9 126.3
Adjusted earnings per share
Basic 42.4 44.5 123.1
Diluted 42.1 44.3 122.5
8. Dividends paid to owners of the Company
The interim dividend of 18.3p (last half year: 16.5p) per share has been
approved by the Board of Directors after 30 September 2023. Accordingly, this
dividend has not been recognised as a liability at the period end and will be
paid on 26 January 2024 to Shareholders on the Register at the close of
business on 15 December 2023. The ex-dividend date is 14 December 2023 and the
final day for dividend reinvestment plan ('DRIP') elections is 5 January 2024.
A dividend of 44.5p (last half year: 35.4p) per share was paid during the
period to 30 September 2023 in relation to the year ended 1 April 2023.
9. Intangible assets
Goodwill at 30 September 2023 is £105 million (last half year: £113 million;
last full year: £109 million). There were no additions or impairments of
goodwill in the period (last half year: £nil; last full year: £nil).
In the period there were additions to other intangible assets of £26 million
(last half year: £18 million; last full year: £46 million) and disposals
with a net book value of £3 million (last half year: £nil; last full year:
£nil).
Capital commitments contracted but not provided for by the Group amounted to
£7 million (last half year: £4 million; last full year: £3 million).
Impairment testing
Assets that have an indefinite useful economic life are not subject to
amortisation and are tested annually for impairment.
Goodwill is the only intangible asset category with an indefinite useful
economic life included within total intangible assets at 30 September 2023.
Management has performed a review for indicators of impairment as at 30
September 2023 and concluded that there are no indicators at this time. The
annual impairment test will be performed at 30 March 2024.
There was no impairment charge for other intangible assets for the 26 weeks to
30 September 2023 (last half year: no impairment; last full year: no
impairment)
10. Property, plant and equipment
In the period there were additions to property, plant and equipment of £66
million (last half year: £44 million; last full year: £147 million) and
disposals with a net book value of £nil (last half year: £nil; last full
year: £nil). Additions include £64 million (last half year: £35 million;
last full year: £136 million) arising as a result of investing cash outflows
and £2 million (last half year: £9 million; last full year: £11 million)
movement in capital expenditure accruals.
Capital commitments contracted but not provided for by the Group amounted to
£51 million (last half year: £43 million; last full year: £38 million).
As at 30 September 2023, the Group had one freehold property that met the
criteria to be classified as held for sale. This asset is required to be
recorded at the lower of carrying value or fair value less any costs to sell.
As the fair value less any costs to sell exceeded the carrying value, the
related asset was recorded at its carrying value of £13 million. The sale of
this property is expected to complete within the next 12 months. As at 1
October 2022 the Group had two freehold properties with a carrying value of
£11 million that met the criteria to be classified as held for sale. The sale
of these properties was completed during the 52 weeks to 1 April 2023
resulting in a net gain on disposal of nil.
During the 26 weeks to 1 October 2022, the Group completed the sale of an
owned property in the US previously classified as held for sale. A gain on
disposal of property of £19 million was included as an adjusting item (refer
to note 4).
Impairment testing
During the current period, management reviewed their assumptions on retail
cash generating units and reviewed these units for any indication of
impairment or impairment reversal. Where indicators of impairment have been
identified, an impairment analysis was carried out and if 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 would be recorded. The
pre-tax cash flow projections used for this review were based on financial
plans of expected revenues and costs of each retail cash generating unit,
approved by management, and extrapolated beyond the current year to the lease
end dates using growth rates and inflation rates appropriate to each store's
location.
During the 26 weeks to 30 September 2023, following the review of impairment
of retail stores, no impairment charges or reversals were recorded against
property, plant and equipment (last half year: £nil; last full year: charge
of £2 million). The impairment review carried out looks at internal and
external impairment indicators for all retail stores with a specified asset
value and the subsequent value-in-use calculations include certain
assumptions, particularly over expected margins and revenue growth over the
lease term. Refer to note 11 for further details of right-of-use assets.
11. Right-of-use assets
In the period there were additions to right-of-use assets of £65 million
(last half year: £79 million; last full year: £157 million) and
remeasurements of £75 million (last half year: £34 million; last full year:
£113 million). Depreciation of right-of-use assets of £111 million (last
half year: £100 million; last full year: £212 million) is included within
operating expenses.
Impairment testing
As a result of the assessment of retail cash generating units for impairment,
no impairment charges or reversals were recorded against right-of-use assets
(last half year: £nil; last full year: net impairment reversal of £1
million). Refer to note 10 for further details of impairment assessment of
retail cash generating units.
During the 26 weeks to 1 October 2022, an impairment reversal of £1 million
was recognised in relation to office premises as part of restructuring costs
in adjusting items (refer to note 4).
12. Trade and other receivables
As at As at As at
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Non-current
Other financial receivables(1) 47 49 45
Other non-financial receivables(2) 2 1 2
Prepayments 3 3 5
Total non-current trade and other receivables 52 53 52
Current
Trade receivables 186 206 184
Provision for expected credit losses (9) (10) (7)
Net trade receivables 177 196 177
Other financial receivables(1) 31 33 25
Other non-financial receivables(2) 68 53 59
Prepayments 71 48 32
Accrued income 18 8 14
Total current trade and other receivables 365 338 307
Total trade and other receivables 417 391 359
1. Other financial receivables include rental deposits and other sundry
debtors.
2. Other non-financial receivable relates to indirect taxes and other taxes
and duties.
The net charge for impairment of financial receivables in the period was £2
million (last half year: net charge of £3 million; last full year: net charge
of £1 million).
13. Inventories
Inventory provisions of £63 million (last half year: £76 million; last full
year: £57 million) are recorded, representing 10.7% (last half year: 13.5%;
last full year: 11.4%) 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.
14. Cash and cash equivalents
As at As at As at
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Cash and cash equivalents held at amortised cost 186 152
Cash at bank and in hand 185
Short-term deposits 76 72 77
261 258 229
Cash and cash equivalents held at fair value through profit and loss 759 797
Short-term deposits 402
Total 663 1,017 1,026
Cash and cash equivalents classified as fair value through profit and loss
relate to deposits held in low volatility net asset value money market funds.
The cash is available immediately and, since the funds are managed to achieve
low volatility, no significant change in value is anticipated. The funds are
monitored to ensure there are no significant changes in value.
15. Trade and other payables
As at As at As at
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Non-current
Other payables(1) 2 2 -
Deferred income and non-financial accruals 14 21 19
Contract liabilities 54 61 57
Total non-current trade and other payables 70 84 76
Current
Trade payables 204 177 186
Other taxes and social security costs 48 54 50
Other payables(1, 2) 209 28 10
Accruals 180 204 199
Deferred income and non-financial accruals 13 16 14
Contract liabilities 13 13 13
Deferred consideration(3) 5 6 5
Total current trade and other payables 672 498 477
Total trade and other payables 742 582 553
1. Other payables are comprised of interest and employee-related liabilities.
2. Includes £201 million related to the share buy-back programme that
commenced in the period and completed in the second half of the year. £173
million (last half year: £20 million; last full year: £nil) relates to the
cost of shares not yet purchased under this agreement and £27 million relates
to shares purchased but not yet paid, together with £1 million anticipated
stamp duty. Refer to note 19 for further details.
3. Deferred consideration relates to the acquisition of the economic right to
the non-controlling interest in Burberry Middle East LLC on 22 April 2016. No
deferred consideration payments were made in the 26 weeks to 30 September 2023
(last half year: £6 million; last full year: £6 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, which are all considered current.
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 As at
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Retail contract liabilities 6 7 6
Licensing contract liabilities 61 67 64
Total contract liabilities 67 74 70
16. Provisions for other liabilities and charges
Property obligations Other Total
£m
costs
£m
£m
Balance as at 1 April 2023 49 13 62
Effect of foreign exchange rate changes (2) - (2)
Created during the period 2 2 4
Utilised during the period (1) - (1)
Released during the period - (6) (6)
Balance as at 30 September 2023 48 9 57
Balance as at 1 October 2022 50 17 67
As at As at As at
30 September 1 October 1 April
2023
2023
£m 2022
£m
£m
Analysis of total provisions:
Non-current 35 40 40
Current 22 27 22
Total 57 67 62
17. Bank overdrafts
Included within bank overdrafts is £93 million (last half year: £76 million;
last full year: £65 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 30 September 2023, the Group held bank overdrafts of £nil
(last half year: £nil; last full year: £nil) excluding balances on cash
pooling arrangements.
The fair value of overdrafts approximates the carrying amount because of the
short maturity of these instruments.
18. Borrowings
On 21 September 2020, Burberry Group plc issued medium term notes with a face
value of £300 million and 1.125% coupon maturing on 21 September 2025 (the
sustainability bond). Proceeds from the sustainability bond will allow the
Group to finance projects which support the Group's sustainability agenda.
There are no financial penalties for not using the proceeds as anticipated.
Interest on the sustainability bond is payable semi-annually. The carrying
value of the bond at 30 September 2023 is £299 million (last half year: £298
million; last full year: £298 million), all movements on the bond are
non-cash. The fair value of the bond at 30 September 2023 is £274 million
(last half year: £257 million; last full year: £273 million).
On 26 July 2021, the Group entered into a £300 million multi-currency
sustainability linked revolving credit facility (RCF) with a syndicate of
banks, maturing on 26 July 2026. There were no drawdowns or repayments of the
RCF during the current or previous period, and at 30 September 2023 there were
no outstanding drawings.
The Group is in compliance with the financial and other covenants within the
facilities above and has been in compliance throughout the financial period.
19. Share capital and reserves
Allotted, called up and fully paid share capital Number £m
Ordinary shares of 0.05p (last year: 0.05p) each
As at 2 April 2022 405,107,301 0.2
Allotted on exercise of options during the period 69,226 -
Cancellation of shares (9,800,686) -
As at 1 October 2022 395,375,841 0.2
As at 1 April 2023 384,267,928 0.2
Allotted on exercise of options during the period 11,910 -
Cancellation of shares (9,265,324) -
As at 30 September 2023 375,014,514 0.2
Other reserves
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 26 weeks to 30 September 2023, the Company entered into agreements
to purchase, at fair value, a total of £400 million of its own shares,
excluding stamp duty, through two share buy-back programmes of £200 million
each (last half year and full year: £400 million through two share buy-back
programmes of £200 million each). The first programme commenced and completed
during the period and resulted in purchases of £200 million of own shares,
excluding stamp duty of £1 million. The second programme commenced in the
period and completed in the second half of the year. £173 million (last half
year: £20 million; last full year: £nil) relating to the cost of shares not
yet purchased under this agreement and £27 million relating to shares
purchased but not yet paid has been charged to retained earnings, with the
payment obligation recognised in payables (refer to note 15).
The cost of own shares purchased by the Company, as part of a share buy-back
programme is offset against retained earnings, as the amounts paid reduce the
profits available for distribution by the Company. When shares are cancelled,
a transfer is made from retained earnings to the capital reserve, equivalent
to the nominal value of the shares purchased and subsequently cancelled. In
the 26 weeks to 30 September 2023, 9.3 million shares were cancelled (last
half year: 9.8 million; last full year: 21.1 million). As at 30 September
2023, the amount held against retained earnings in relation to shares bought
back but not yet cancelled was £27 million (last half year: £13 million;
last full year: £nil) including stamp duty of £nil million (last half year:
£nil; last full year: £nil).
As at 30 September 2023, the Company held 5.2 million treasury shares (last
half year: 6.1 million; last full year: 6.1 million), with a market value of
£100 million based on the share price at the reporting date (last half year:
£109 million; last full year: £157 million). The treasury shares held by the
Company are related to the share buy-back programme completed during the 52
weeks to 1 April 2023. During the 26 weeks to 30 September 2023, 0.8 million
treasury shares were transferred to ESOP trusts (last half year: 2.3 million;
last full year: 2.3 million). During the 26 weeks to 30 September 2023, no
treasury shares were cancelled (last half year: none; last full year: none).
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 30 September 2023 the cost of own shares held by ESOP
trusts and offset against retained earnings is £38 million (last half year:
£48 million; last full year: £42 million). As at 30 September 2023, the ESOP
trusts held 2.1 million shares (last half year: 2.7 million; last full year:
2.3 million) in the Company, with a market value of £41 million (last half
year: £48 million; last full year: £60 million). In the 26 weeks to 30
September 2023 the ESOP trusts and the Company have waived their entitlement
to dividends.
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.
20. Related party transactions
The Group's significant related parties are disclosed in the Annual Report for
the 52 weeks to 1 April 2023. There were no material changes to these related
parties in the period, other than changes to the composition of the Board.
Other than total compensation in respect of key management, no material
related party transactions have taken place during the current period.
21. Fair value disclosure for financial instruments
The Group's principal financial instruments comprise derivative instruments,
cash and cash equivalents, borrowings (including overdrafts), trade and other
receivables and trade and other payables arising directly from operations.
The fair value of the Group's financial assets and liabilities held at
amortised cost approximate their carrying amount due to the short maturity of
these instruments with the exception of the £299 million sustainability bond
(last half year: £298 million) and £14 million (last half year: £14
million) held in non-current other receivables relating to an interest-free
loan provided to a landlord in Korea. At 30 September 2023, the discounted
fair value of the sustainability bond is £274 million (last half year: £257
million) and the discounted fair value of the loan provided to a landlord in
Korea is £13 million (last half year: £13 million).
The measurements for financial instruments carried at fair value are
categorised into different levels in the fair value hierarchy based on the
inputs to the valuation technique used. The different levels are defined as
follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Group can access at the measurement date.
Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3: includes unobservable inputs for the asset or liability.
Observable inputs are those which are developed using market data, such as
publicly available information about actual events or transactions. The Group
has an established framework with respect to measurement of fair values,
including Level 3 fair values. The Group regularly reviews any significant
inputs which are not derived from observable market data and considers, where
available, relevant third-party information, to support the conclusion that
such valuations meet the requirements of IFRS. The classification level in the
fair value hierarchy is also considered periodically. Significant valuation
issues are reported to the Audit Committee.
The fair value of those cash and cash equivalents measured at fair value
through profit and loss, principally money market funds, is derived from their
net asset value which is based on the value of the portfolio investment
holdings at the balance sheet date. This is considered to be a Level 2
measurement.
The fair value of forward foreign exchange contracts, equity swap contracts
and trade and other receivables is based on a comparison of the contractual
and market rates and, in the case of forward foreign exchange contracts, after
discounting using the appropriate yield curve as at the balance sheet date.
All Level 2 fair value measurements are calculated using inputs which are
based on observable market data.
22. Contingent liabilities
The Group is subject to claims against it and to tax audits in a number of
jurisdictions which arise in the ordinary course of business. These typically
relate to Value Added Taxes, sales taxes, customs duties, corporate taxes,
transfer pricing, payroll taxes, various contractual claims, legal proceedings
and other matters. Where appropriate, the estimated cost of known obligations
have been provided in these financial statements in accordance with the
Group's accounting policies. The Group does not expect the outcome of current
similar contingent liabilities to have a material effect on the Group's
financial position.
23. Events after the balance sheet date
Acquisition of subsidiary
On 2 October 2023, Burberry Italy S.r.l., Burberry's wholly-owned subsidiary,
acquired a 100% holding in a business from Italian technical outerwear
supplier Pattern SpA, a company incorporated in Italy, for total cash
consideration of £19 million.
Based in Turin, the activities of the business acquired revolve around the
engineering and production of Burberry products. The acquisition allows the
Group to secure capacity, build technical outerwear capabilities and further
embed sustainability into its value chain.
The assets and liabilities to be recognised as a result of the acquisition are
as follows:
Provisional fair value £m
Assets acquired
Property, plant and equipment 1
Inventories 2
Right-of-use assets 2
Lease liabilities (1)
Employee-related liabilities (1)
Net assets acquired 3
Goodwill arising on acquisition 16
Total cost of acquisition 19
The values used in accounting for the identifiable assets and liabilities of
the acquisition are provisional in nature as they are still being determined.
If necessary, adjustments will be made to these carrying values and the
related goodwill, within 12 months of the acquisition date.
The estimated goodwill arising on the acquisition of £16 million reflects the
expected synergies from vertical integration of engineering and production of
technical outerwear within the Group's supply chain together with the value of
the retained workforce.
If the acquisition had occurred at the beginning of the financial year, the
impact on the Group's revenue and profit or loss would not have been material.
Lease Remeasurement
Subsequent to 30 September 2023, Burberry agreed a material lease modification
in relation to a key retail store. The modification included agreeing renewal
terms at an earlier date than set out in the original agreement and extending
the lease term for an additional ten years, with the option to extend for a
further ten years. The modification will result in an additional right-of-use
asset and lease liability of approximately £50 million being recorded in the
second half of the year. The Group is not reasonably certain to exercise the
10 year extension option, resulting in approximately £100 million in
undiscounted future cash flows that will not be included in the initial
right-of-use asset and lease liabilities.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that the condensed consolidated interim financial
statements have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the UK and that the
Interim Management Report and condensed consolidated interim financial
statements include a fair review of the information required by Disclosure
Guidance and Transparency Rules 4.2.7 and 4.2.8, namely:
- an indication of important events that have occurred during the first 26
weeks of the financial year and their impact on the condensed consolidated
interim financial statements, and a description of the principal risks and
uncertainties for the remaining 26 weeks of the financial year; and
- material related party transactions in the first 26 weeks of the financial
year and any material changes in the related party transactions described in
the last Annual Report.
The Directors of Burberry Group plc are consistent with those listed in the
Burberry Group plc Annual Report for the 52 weeks to 1 April 2023 with the
exception of Kate Ferry who was appointed on 17 July 2023, Alessandra Cozzani
who was appointed on 1 September 2023, and Matthew Key who retired on 12 July
2023.
A list of current directors is maintained on the Burberry Group plc website:
www.burberryplc.com (http://www.burberryplc.com) .
By order of the Board
Jonathan Akeroyd
Chief Executive Officer
15 November 2023
Kate Ferry
Chief Financial Officer
15 November 2023
INDEPENDENT REVIEW REPORT TO BURBERRY GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 26 week period ended 30
September 2023 which comprises the condensed Group income statement, the
condensed Group statement of comprehensive income, the condensed Group balance
sheet, the condensed Group statement of changes in equity, the condensed Group
statement of cash flows and the related explanatory notes 1 to 23. We have
read the other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 week period ended 30 September 2023 is not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Auditing Practices
Board. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in Note 2, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion is based on procedures that are
less extensive than audit procedures, as described in the 'Basis for
Conclusion' paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our work, for this report, or for the conclusions
we have formed.
Ernst & Young LLP
London
15 November 2023
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