REG - Burberry Group PLC - Interim Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 2
12/11/2015 07:02
- Part 2: For the preceding part double click ID:nRSL4314Fa
charges 12 (9.7) (10.0) (10.3)
Income tax liabilities (70.8) (52.4) (86.8)
(553.2) (537.4) (580.8)
Total liabilities (689.1) (670.8) (721.7)
Net assets 1,429.9 1,229.7 1,451.5
EQUITY
Capital and reserves attributable to owners of the Company
Ordinary share capital 14 0.2 0.2 0.2
Share premium account 208.5 206.6 207.6
Capital reserve 45.8 40.0 45.3
Hedging reserve 2.6 1.5 (0.3)
Foreign currency translation reserve 117.7 114.7 147.3
Retained earnings 1,004.4 819.2 1,000.8
Equity attributable to owners of the Company 1,379.2 1,182.2 1,400.9
Non-controlling interests in equity 50.7 47.5 50.6
Total equity 1,429.9 1,229.7 1,451.5
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY - UNAUDITED
Attributable to owners of the Company
Ordinary share Share premium account Other reserves Retained earnings Total Non-controlling interest Total
capital £m £m £m £m £m equity
£m £m
Balance as at 1 April 2014 0.2 204.8 150.3 810.1 1,165.4 42.6 1,208.0
Profit for the period - - - 104.5 104.5 3.9 108.4
Other comprehensive income:
Cash flow hedges - losses deferred in equity - - (3.3) - (3.3) - (3.3)
Cash flow hedges - gains transferred to income - - (1.9) - (1.9) - (1.9)
Foreign currency translation differences - - 10.5 - 10.5 1.4 11.9
Tax on other comprehensive income - - 0.1 - 0.1 - 0.1
Total comprehensive income for the period - - 5.4 104.5 109.9 5.3 115.2
Transfers between reserves - - 0.5 (0.5) - - -
Transactions with owners:
Employee share incentive scheme -
- value of share options granted - - - 16.6 16.6 - 16.6
- value of share options transferred to liabilities - - - (0.8) (0.8) - (0.8)
- tax on share options granted - - - 3.6 3.6 - 3.6
- exercise of share options - 1.8 - - 1.8 - 1.8
Purchase of own shares by ESOP trusts - - - (12.2) (12.2) - (12.2)
Dividend paid in the period - - - (102.1) (102.1) (0.4) (102.5)
Balance as at 30 September 2014 0.2 206.6 156.2 819.2 1,182.2 47.5 1,229.7
Balance as at 1 April 2015 0.2 207.6 192.3 1,000.8 1,400.9 50.6 1,451.5
Profit for the period - - - 119.5 119.5 1.5 121.0
Other comprehensive income:
Cash flow hedges - gains deferred in equity - - 2.1 - 2.1 - 2.1
Cash flow hedges - losses transferred to income - - 1.6 - 1.6 - 1.6
Foreign currency translation differences - - (30.4) - (30.4) (1.4) (31.8)
Tax on other comprehensive income - - 0.1 - 0.1 - 0.1
Total comprehensive income for the period - - (26.6) 119.5 92.9 0.1 93.0
Transfers between reserves - - 0.4 (0.4) - - -
Transactions with owners:
Employee share incentive scheme
- value of share options granted - - - 3.3 3.3 - 3.3
- value of share options transferred to liabilities - - - (1.1) (1.1) - (1.1)
- tax on share options granted - - - (5.2) (5.2) - (5.2)
- exercise of share options - 0.9 - - 0.9 - 0.9
Dividend paid in the period - - - (112.5) (112.5) - (112.5)
Balance as at 30 September 2015 0.2 208.5 166.1 1,004.4 1,379.2 50.7 1,429.9
CONDENSED GROUP STATEMENT OF CASH FLOWS - UNAUDITED
Note Six months to Six months to Audited
30 September 2015 30 September 2014 Year to
£m £m 31 March
2015
£m
Cash flows from operating activities
Operating profit 144.2 144.7 440.3
Depreciation 53.5 50.0 104.0
Amortisation 17.1 16.2 34.6
Net impairment charges 9 3.7 0.8 4.1
Loss on disposal of property, plant and equipment and intangible assets 0.6 - 2.1
Losses/(Gains) on derivative instruments 1.4 (1.1) (2.0)
Charges in respect of employee share incentive schemes 3.3 16.6 21.0
Proceeds/(Payment) from settlement of equity swap contracts 0.3 (0.2) (0.2)
Increase in inventories (42.9) (62.1) (15.1)
Increase in receivables (2.4) (33.7) (43.8)
(Decrease)/Increase in payables (11.4) 18.1 23.1
Cash generated from operating activities 167.4 149.3 568.1
Interest received 2.7 1.6 3.8
Interest paid (1.0) (1.5) (2.6)
Taxation paid (56.4) (61.0) (114.4)
Net cash generated from operating activities 112.7 88.4 454.9
Cash flows from investing activities
Purchase of property, plant and equipment (67.2) (57.7) (127.8)
Purchase of intangible assets (12.9) (15.3) (27.9)
Proceeds from sale of property, plant and equipment 0.5 - -
Proceeds from sale of intangible assets - - 1.3
Net cash outflow from investing activities (79.6) (73.0) (154.4)
Cash flows from financing activities
Dividends paid in the year (112.5) (102.1) (144.9)
Dividends paid to non-controlling interest - (0.4) (0.4)
Capital contributions by non-controlling interest - - 0.4
Payment to acquire additional interest in subsidiary from non-controlling interest - - (3.4)
Issue of ordinary share capital 0.9 1.8 2.8
Purchase of own shares by ESOP trusts - (12.2) (19.2)
Net cash outflow from financing activities (111.6) (112.9) (164.7)
Net (decrease)/increase in cash and cash equivalents (78.5) (97.5) 135.8
Effect of exchange rate changes (14.9) 1.9 13.9
Cash and cash equivalents at beginning of period 552.2 402.5 402.5
Cash and cash equivalents at end of period 458.8 306.9 552.2
ANALYSIS OF NET CASH - UNAUDITED Note As at As at Audited
30 September 2015 30 September 2014 As at
£m £m 31 March 2015
£m
Cash and cash equivalents as per the Balance Sheet 520.6 361.8 617.4
Bank overdrafts 13 (61.8) (54.9) (65.2)
Net cash 458.8 306.9 552.2
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, wholesaler and retailer. The Group also licenses third parties
to manufacture and distribute products using the 'Burberry' trade marks. 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
The financial information contained in this report is unaudited. The Condensed
Group Income Statement, Condensed Group Statement of Comprehensive Income,
Condensed Group Statement of Changes in Equity and Condensed Group Statement
of Cash Flows for the interim period ended 30 September 2015, and the
Condensed Group Balance Sheet as at 30 September 2015 and related notes have
been reviewed by the auditors and their report to the Company is set out on
page 32. 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 year ended 31 March 2015 were
approved by the Board of Directors on 19 May 2015 and have been filed with the
Registrar of Companies. The report of the auditors on the statutory accounts
for the year ended 31 March 2015 was unqualified, did not contain an emphasis
of matter paragraph and did not contain a statement under Section 498 of the
Companies Act 2006.
These condensed consolidated interim financial statements for the six months
ended 30 September 2015 have been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Services Authority and with IAS 34,
'Interim Financial Reporting' as adopted by the European Union. This report
should be read in conjunction with the Group's financial statements for the
year ended 31 March 2015, which have been prepared in accordance with
International Financial Reporting Standards ('IFRSs') as adopted by the
European Union.
The directors have made enquiries and reviewed the Group's updated forecasts
and projections. These include the assumptions around the Group's products and
markets, expenditure commitments, expected cashflows and borrowing facilities.
Taking into account reasonable possible changes in trading performance, and
after making enquiries, the directors consider it appropriate to continue to
adopt the going concern basis in preparing the condensed consolidated interim
financial statements for the six months ended 30 September 2015.
Accounting policies
Accounting policies and presentation are consistent with those applied in the
Group's financial statements for the year ended 31 March 2015, as set out on
pages 123 to 131 of those financial statements, with the exception of
taxation.
Taxes on income in the interim periods are accrued using the expected tax rate
that would be applicable to total annual earnings.
Key sources of estimation and judgement
The preparation of the condensed consolidated interim financial statements
requires that management make certain judgements, estimates and assumptions
that affect the reported revenues, expenses, assets and liabilities and the
disclosure of certain contingent liabilities. The key sources of estimation
and uncertainty and the assumptions applied in the preparation of these
condensed consolidated interim financial statements are consistent with those
applied in the Group's financial statements for the year ended 31 March 2015,
as set out on pages 122 and 123 of those financial statements, with the
exception of taxation, as described above.
Adjusted profit before taxation and adjusting items
In order to provide additional consideration of the underlying performance of
the Group's on-going business, the Group's results include a presentation of
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 underlying performance of the
Group's on-going business. Generally this will include those items that are
largely one-off and material in nature and any fair value movements on options
held over equity interests held for non-speculative purposes. 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 are added
back/deducted from profit attributable to owners of the Company to arrive at
adjusted earnings per share.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
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, department stores globally and multi-brand specialty
accounts. The flow of global product between retail and wholesale channels and
across our regions is monitored and optimised at a corporate level and
implemented via the Group's inventory hubs situated in Asia, Europe and the
USA.
Licensing revenues are generated through the receipt of royalties from the
Group's partners in Japan and global licensees of eyewear, watches and
European childrenswear.
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. Finance
income and charges are not included in the result for each operating segment
that is reviewed by the Board.
Retail / Wholesale Licensing Total
Six months to Six months to Six months to Six months to Six months to Six months to
30 September 30 September 30 September 30 September 30 September 30 September
2015 2014 2015 2014 2015 2014
£m £m £m £m £m £m
Retail 773.6 748.1 - - 773.6 748.1
Wholesale 304.8 317.2 - - 304.8 317.2
Licensing - - 27.2 35.8 27.2 35.8
Total segment revenue 1,078.4 1,065.3 27.2 35.8 1,105.6 1,101.1
Inter-segment revenue(1) - - (1.1) (1.1) (1.1) (1.1)
Revenue from external customers 1,078.4 1,065.3 26.1 34.7 1,104.5 1,100.0
Adjusted operating profit 129.7 124.3 22.0 27.9 151.7 152.2
Adjusting items(2) 1.8 (10.5)
Finance income 2.6 1.9
Finance expense (1.4) (1.8)
Profit before taxation 154.7 141.8
Year to 31 March 2015 Retail / Wholesale Licensing Total
£m £m £m
Retail 1,807.4 - 1,807.4
Wholesale 648.1 - 648.1
Licensing - 70.1 70.1
Total segment revenue 2,455.5 70.1 2,525.6
Inter-segment revenue(1) - (2.4) (2.4)
Revenue from external customers 2,455.5 67.7 2,523.2
Adjusted operating profit 399.2 56.0 455.2
Adjusting items(2) (11.2)
Finance income 4.4
Finance expense (3.8)
Profit before taxation 444.6
(1) Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would be available to unrelated third
parties.
(2) Refer to Condensed Group Income Statement for details of adjusting items.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. Segmental analysis (continued)
Revenue by destination Six months to Six months to Year to
30 September 30 September 31 March
2015 2014 2015
£m £m £m
Asia Pacific 377.3 384.8 938.1
EMEIA(1) 415.7 410.4 869.0
Americas 285.4 270.1 648.4
Retail/Wholesale 1,078.4 1,065.3 2,455.5
Licensing 26.1 34.7 67.7
Total 1,104.5 1,100.0 2,523.2
(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 some employee costs, most of the operating
costs are phased more evenly across the year. As a result, operating profit is
usually expected to be higher in the second half of the year.
4. Adjusting items
Amortisation of the fragrance and beauty licence intangible asset
During the year ended 31 March 2013, an intangible asset of £70.9m was
recognised on the Balance Sheet, relating to the present value of the
anticipated incremental income to be earned by the Group as a result of
selling Beauty products through retail and wholesale channels rather than
under licence, following the termination of the existing licence relationship
with Interparfums SA. This asset is amortised on a straight line basis over
the period 1 April 2013 to 31 December 2017. The amortisation is presented as
an adjusting item, which is consistent with the treatment of the cost
recognised on termination of the licence relationship in the year ended 31
March 2013. The amortisation expense recognised for the six months ended 30
September 2015 was £7.5m (six months ended 30 September 2014: £7.5m; year
ended 31 March 2015: £14.9m). A related tax credit of £1.5m (30 September
2014: £1.6m; 31 March 2015: £3.1m) has also been recognised in the current
period.
Put option liability finance income/charge
The financing income of £9.3m for the six months ended 30 September 2015
relates to unrealised fair value movements including the unwinding of the
discount on the put option liability over the non-controlling interest in
Burberry (Shanghai) Trading Co., Ltd (six months ended 30 September 2014:
charge of £3.0m; year ended 31 March 2015: income of £3.7m). No tax has been
recognised on this item, as the value of the option on exercise is not
considered to be deductible for tax purposes.
5. Taxation
The tax charge for the six months ended 30 September 2015 has been calculated
based on an estimated effective underlying rate of tax on adjusted profit
before taxation for the full year of 23.0% (30 September 2014: 23.0%; year
ended 31 March 2015: 23.4%). Tax on adjusting items has been recognised at the
prevailing tax rates as appropriate. The resulting effective tax rate on
reported profit before taxation is 21.8% (30 September 2014: 23.6%; 31 March
2015: 23.3%).
Total taxation recognised in the Condensed Group Income Statement comprises:
Six months to Six months to Year to
30 September 30 September 31 March
2015 2014 2015
£m £m £m
Tax on adjusted profit before taxation 35.2 35.0 106.6
Tax on adjusting items (note 4) (1.5) (1.6) (3.1)
Total taxation charge 33.7 33.4 103.5
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
6. Earnings per share
The calculation of basic earnings per share is based on profit attributable to
equity holders 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.
Six months to Six months to Year to
30 September 30 September 31 March
2015 2014 2015
£m £m £m
Attributable profit for the period before adjusting items(1) 116.2 113.4 344.4
Effect of adjusting items(1) (after taxation) 3.3 (8.9) (8.1)
Attributable profit for the period 119.5 104.5 336.3
(1) Refer to Condensed Group Income Statement for the 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 employee share option plan
trusts ('ESOP trusts').
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.
Six months to Six months to Year to
30 September 30 September 31 March
2015 2014 2015
Millions Millions Millions
Weighted average number of ordinary shares in issue during the period 441.6 439.6 440.0
Dilutive effect of the share incentive schemes 5.6 7.6 7.8
Diluted weighted average number of ordinary shares in issue during the period 447.2 447.2 447.8
7. Dividends
The interim dividend of 10.20p (2014: 9.70p) per share has been approved by
the Board of Directors after 30 September 2015. Accordingly, this dividend has
not been recognised as a liability at the period end.
The interim dividend will be paid on 22 January 2016 to Shareholders on the
Register at the close of business on 29 December 2015.
A dividend of 25.50p (2014: 23.20p) per share was paid during the period ended
30 September 2015 in relation to the year ended 31 March 2015.
8. Intangible assets
Goodwill at 30 September 2015 is £84.1m (2014: £83.0m).
In the period there were additions to other intangible assets of £15.0m (2014:
£16.1m) and disposals with a net book value of £nil (2014: £1.4m).
Capital commitments contracted but not provided for by the Group amounted to
£0.8m (2014: £3.4m).
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 2015.
Management has performed a review for indicators of impairment as at 30
September 2015. There is no indication that the goodwill may be impaired. The
annual impairment test will be performed at 31 March 2016.
9. Property, plant and equipment
In the period there were additions to property, plant and equipment of £79.8m
(2014: £55.2m) and disposals with a net book value of £0.6m (2014: £nil).
Capital commitments contracted but not provided for by the Group amounted to
£16.3m (2014: £36.9m).
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
9. Property, plant and equipment (continued)
Impairment testing
For the six months ended 30 September 2015, a net impairment charge of £3.7m
(2014: £0.8m) was identified. The impairment charge relates to 17 retail cash
generating units (2014: 16 cash generating units) for which the total
recoverable amount at the balance sheet date is £8.3m (2014: £4.7m).
Where indicators of impairment were identified, the impairment review compared
the value-in-use of the assets to the carrying values at 30 September 2015.
The pre-tax cash flow projections were based on financial plans of expected
revenues and costs of each retail cash generating unit, approved by
management, and extrapolated beyond the financial year to the lease exit dates
using growth rates and inflation rates appropriate to each store's location.
The pre-tax discount rates used in these calculations are based on the Group's
weighted average cost of capital adjusted for country-specific tax rates and
risks.
10. Trade and other receivables
As at As at As at
30 September 2015 30 September 2014 31 March
£m £m 2015
£m
Non-current
Deposits and other receivables 37.1 32.5 39.6
Other non-financial receivables 3.1 - 2.7
Prepayments 25.5 12.5 18.2
Total non-current trade and other receivables 65.7 45.0 60.5
Current
Trade receivables 177.1 184.4 193.6
Provision for doubtful debts (4.1) (6.2) (4.6)
Net trade receivables 173.0 178.2 189.0
Other financial receivables 20.6 29.8 16.3
Other non-financial receivables 20.6 19.6 23.9
Prepayments 39.6 35.5 28.1
Accrued income 2.3 2.5 3.0
Total current trade and other receivables 256.1 265.6 260.3
Total trade and other receivables 321.8 310.6 320.8
11. Trade and other payables
As at As at As at
30 September 2015 30 September 2014 31 March2015
£m £m £m
Non-current
Put option liability over non-controlling interest 44.0 55.8 54.4
Other payables 3.5 3.6 3.7
Deferred income and non-financial accruals 64.3 54.3 59.0
Total non-current trade and other payables 111.8 113.7 117.1
Current
Trade payables 168.8 177.1 159.8
Other taxes and social security costs 53.6 68.7 61.0
Other payables 14.5 7.1 4.5
Accruals 153.1 148.1 164.0
Deferred income and non-financial accruals 17.9 12.5 16.7
Total current trade and other payables 407.9 413.5 406.0
Total trade and other payables 519.7 527.2 523.1
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
11. Trade and other payables (continued)
Put option liability over non-controlling interest
Following the acquisition of the Burberry retail and distribution business in
China, Sparkle Roll Holdings Limited, a non-Group company, retains a 15%
economic interest in the Group's business in China. Put and call options exist
over this interest stake which are exercisable after 1 September 2015 in the
case of the call option, and after 1 September 2020 in the case of the put
option. The net present value of the put option payment has been recognised as
a non-current financial liability under IAS 39. The present value of any
payment under the call option would be different should Burberry decide to
exercise the call option.
The value of the put option liability is £44.0m at the period end (30
September 2014: £55.8m; 31 March 2015: £54.4m). The movement in the liability
for the period includes a decrease of £9.3m relating to unrealised fair value
movements, as described in note 4, combined with the impact of translation of
the put liability to the Group's presentational currency.
The fair value of the put option liability has been derived using a present
value calculation, incorporating observable and non-observable inputs (Level 3
- refer to note 17 for details of the fair value hierarchy classification for
financial instruments). This valuation technique has been adopted as it most
closely mirrors the contractual arrangement. The key inputs applied in
arriving at the value of the put option liability are the future performance
of the Group's business in China; the average historical Burberry Group plc
multiple; and the risk adjusted discount rate for China, taking into account
the risk free rate in China. The future performance of the business is
estimated by using management's business plans together with long-term
observable growth forecasts.
The carrying value of the put option liability is dependent on assumptions
applied in determining these key inputs, and is subject to change in the event
that there is a change in any of those assumptions. The valuation is updated
at every reporting period or more often if a significant change to any input
is observed.
A 10% increase/decrease in the future performance of the Group's business in
China at the put option exercise date would result in a £4.4m
increase/decrease in the carrying value of the put option liability at 30
September 2015 (30 September 2014: £5.6m; 31 March 2015: £5.4m), and a
corresponding £4.4m loss/gain in the profit before taxation for the period
ended 30 September 2015 (30 September 2014: £5.6m; 31 March 2015: £5.4m).
A 1% increase/decrease in the risk adjusted discount rate for China would
result in a £2.1m decrease/£2.2m increase in the carrying value of the put
option liability at 30 September 2015 (30 September 2014: £3.0m decrease/£3.1m
increase; 31 March 2015: £2.9m decrease/£3.0m increase), and a corresponding
£2.1m gain/£2.2m loss in the profit before taxation for the period ended 30
September 2015 (30 September 2014: £3.0m gain/£3.1m loss; 31 March 2015: £2.9m
gain/£3.0m loss).
Ultimately, the put option liability is subject to a contractual cap of £200m.
The undiscounted value of the put option liability at 30 September 2015 is
£83.2m (30 September 2014: £114.3m, 31 March 2015: £109.0m).
12. Provisions for other liabilities and charges
Property obligations Restructuring costs Other Total
£m £m costs £m
£m
As at 1 April 2015 29.4 0.8 2.3 32.5
Effect of foreign exchange rate changes (0.6) - - (0.6)
Created during the period 7.4 - 0.7 8.1
Discount unwind 0.1 - - 0.1
Utilised during the period (4.4) (0.2) (0.2) (4.8)
Released during the period (2.4) (0.6) (0.1) (3.1)
As at 30 September 2015 29.5 - 2.7 32.2
As at 30 September 2014 24.5 1.2 1.9 27.6
As at As at As at
30 September 2015 30 September 2014 31 March 2015
£m £m £m
Analysis of total provisions:
Non-current 22.5 17.6 22.2
Current 9.7 10.0 10.3
Total 32.2 27.6 32.5
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
13. Bank overdrafts and borrowings
Included within bank overdrafts is £57.2m (2014: £52.1m) 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 2015,
the Group held bank overdrafts of £4.6m (2014: £2.8m) excluding balances on
cash pooling arrangements.
On 25 November 2014, the Group entered a £300m multi-currency revolving credit
facility with a syndicate of third party banks. This replaced the previous
facility which would have matured on 30 June 2016. At 30 September 2015, there
were £nil outstanding drawings. The facility matures in November 2019. The
agreement contains two options which allow the Group to extend for an
additional one year which are exercisable in 2015 and 2016, at the consent of
the syndicate.
Since the period end, the Group has exercised the first option, extending the
maturity of the facility to November 2020. Consent to extend was received from
all members of the syndicate.
14. Share capital and other reserves
Allotted, called up and fully paid share capital Number of shares Share capital
million £m
As at 1 April 2014 443.6 0.2
Allotted on exercise of options during the period 0.6 -
As at 30 September 2014 444.2 0.2
As at 1 April 2015 444.7 0.2
Allotted on exercise of options during the period 0.2 -
As at 30 September 2015 444.9 0.2
Other reserves
The cost of own shares held by the Group has been offset against retained
earnings, as the amounts paid reduce the profits available for distribution by
the Company. As at 30 September 2015 the amount held against this reserve was
£32.7m (2014: £52.0m). As at 30 September 2015, ESOP trusts held 2.4m shares
(2014: 3.8m) in the Company, with a market value of £32.8m (2014: £57.8m). In
the six months ended 30 September 2015 the Burberry Group plc ESOP trust
waived its entitlement to dividends of £1.0m (2014: £0.9m).
15. Related party disclosures
The Group's significant related parties are disclosed in the Annual Report for
the year ended 31 March 2015. There were no material changes to these related
parties in the period. Other than total compensation in respect of key
management, no material related party transactions have taken place during the
first six months of the current financial year.
16. Foreign currency
The results of overseas subsidiaries are translated into the Group's
presentation currency of Sterling each month at the weighted average exchange
rate for the period according to the phasing of the Group's trading results.
The weighted average exchange rate is used, as it is considered to approximate
the actual exchange rates on the dates of the transactions. The assets and
liabilities of such undertakings are translated at period end exchange rates.
Differences arising on the retranslation of the opening net investment in
subsidiary companies, and on the translation of their results, are taken
directly to the foreign currency translation reserve within equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
16. Foreign currency (continued)
The principal exchange rates used were as follows:
Average
Six months to Six months to Year to
30 September 30 September 31 March
2015 2014 2015
Euro 1.39 1.24 1.28
US Dollar 1.54 1.68 1.60
Chinese Yuan Renminbi 9.62 10.38 9.94
Hong Kong Dollar 11.94 12.98 12.42
Korean Won 1,743 1,721 1,709
Closing
As at As at As at
30 September 30 September 31 March
2015 2014 2015
Euro 1.35 1.28 1.38
US Dollar 1.51 1.62 1.48
Chinese Yuan Renminbi 9.61 9.96 9.21
Hong Kong Dollar 11.72 12.59 11.51
Korean Won 1,793 1,715 1,646
The average exchange rate achieved by the Group on its Yen royalty income,
taking into account its use of Yen forward exchange contracts on a monthly
basis approximately twelve months in advance of royalty receipts, was Yen
174.7: £1 in the six months ended 30 September 2015 (six months ended 30
September 2014: Yen 157.3: £1; year ended 31 March 2015: Yen 164.2: £1).
17. Fair value disclosures for financial instruments
The Group classifies its instruments into the following categories:
Financial instrument category Classification Measurement Fair value measurement hierarchy(2)
Cash and cash equivalents Loans and receivables Amortised cost N/A
Trade and other receivables Loans and receivables Amortised cost N/A
Trade and other payables Other financial liabilities Amortised cost N/A
Borrowings Other financial liabilities Amortised cost N/A
Put option over non-controlling interest Derivative instrument Fair value through profit and loss 3
Forward foreign exchange contracts(1) Derivative instrument Fair value through profit and loss 2
Equity swap contracts Derivative instrument Fair value through profit and loss 2
Onerous lease Other financial liabilities Amortised cost N/A
(1) Hedge accounting is applied to cash flow hedges to the extent that it is
achievable.
(2) The fair value measurement hierarchy is only applicable for financial
instruments measured at fair value.
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.
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 techniques 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.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
17. Fair value disclosures for financial instruments (continued)
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 forward foreign exchange contracts and equity swap contracts
is based on a comparison of the contractual and market rates and, in the case
of forward foreign exchange contracts after discounting using the appropriate
yield curve, as at the balance sheet date. All Level 2 fair value
measurements are calculated using inputs which are based on observable market
data.
Further information on the calculation of fair value of the put option over
non-controlling interest is disclosed in note 11.
18. Contingent Liabilities
In a number of jurisdictions the Group is subject to tax audits and claims
against it covering, inter alia, valued added taxes, sales taxes, customs
duties, corporate taxes and payroll taxes. Included in these claims is a
dispute with the Spanish tax authorities regarding the tax treatment of
interest paid during the year ended 31 March 2005 arising in respect of debt
that was put in place after the Group had taken specialist external advice.
The Group is looking to resolve this dispute by all reasonable means. Where
appropriate, the estimated cost of known obligations have been provided in
these financial statements in accordance with the Group's accounting policies
but these matters are inherently difficult to quantify. While changes to the
amounts that may be payable could be material to the results or cash flows of
the Group in the period in which they are recognised the Group does not
currently expect the outcome of these contingent liabilities to have a
material effect on the Group's financial condition.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors' confirm that the condensed consolidated interim financial
statements have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European Union
and that the Interim Management Report and condensed consolidated interim
financial statements include a fair review of the information required by
Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:
- an indication of important events that have occurred during the first
six months 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 six months of the financial year;
and
- material related party transactions in the first six months 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 listed in the Burberry Group plc
Annual Report for the year ended 31 March 2015.
A list of current directors is maintained on the Burberry Group plc website:
www.burberryplc.com.
By order of the Board
Sir John Peace
Chairman
11 November 2015
Carol Fairweather
Chief Financial Officer
11 November 2015
INDEPENDENT REVIEW REPORT TO BURBERRY GROUP PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed the condensed consolidated interim financial statements,
defined below, in the interim report of Burberry Group plc for the six months
ended 30 September 2015. Based on our review, nothing has come to our
attention that causes us to believe that the condensed consolidated interim
financial statements are not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the European Union and
the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
This conclusion is to be read in the context of what we say in the remainder
of this report.
What we have reviewed
The condensed consolidated interim financial statements, which are prepared by
Burberry Group plc, comprise:
- Condensed Group Balance Sheet as at 30 September 2015;
- Condensed Group Income Statement and Statement of Comprehensive Income
for the period then ended;
- Condensed Group Statement of Changes in Equity and Statement of Cash
Flows for the period then ended;
- the analysis of net cash as at 30 September 2015; and
- the notes to the condensed consolidated interim financial statements.
As disclosed in note 2, the financial reporting framework that has been
applied in the preparation of the full annual financial statements of the
group is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The condensed consolidated interim financial statements included in the
interim report have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European Union
and the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
What a review of condensed consolidated financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making
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