REG - Burberry Group PLC - Interim Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 2
09/11/2016 07:06
- Part 2: For the preceding part double click ID:nRSI6790Oa
249.9 117.7 164.9
Retained earnings 990.4 1,004.4 1,140.9
Equity attributable to owners of the Company 1,505.4 1,379.2 1,565.0
Non-controlling interests in equity 5.4 50.7 55.9
Total equity 1,510.8 1,429.9 1,620.9
CONDENSED GROUP STATEMENT OF CHANGED IN EQUITY - UNAUDITED
Attributable to owners of the Company
Note 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 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 schemes -
- 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
Balance as at 1 April 2016 0.2 209.8 214.1 1,140.9 1,565.0 55.9 1,620.9
Profit for the period - - - 72.0 72.0 1.1 73.1
Other comprehensive income:
Cash flow hedges - gains deferred in equity - - 9.6 - 9.6 - 9.6
Cash flow hedges - losses transferred to income - - 0.2 - 0.2 - 0.2
Net investment hedge - - (3.2) - (3.2) - (3.2)
Foreign currency translation differences - - 88.8 - 88.8 1.6 90.4
Tax on other comprehensive income - - (5.1) - (5.1) - (5.1)
Total comprehensive income for the period - - 90.3 72.0 162.3 2.7 165.0
Transactions with owners:
Employee share incentive schemes
- value of share options granted - - - 5.3 5.3 - 5.3
- value of share options transferred to liabilities - - - (0.3) (0.3) - (0.3)
- tax on share options granted - - - (1.0) (1.0) - (1.0)
- exercise of share options - 0.6 - - 0.6 - 0.6
Purchase of own shares
- share buy-back - - - (100.5) (100.5) - (100.5)
- held by ESOP trusts - - - (13.3) (13.3) - (13.3)
Put option over non-controlling interest 18 - - - 51.0 51.0 - 51.0
Acquisition of additional interest in subsidiary from non-controlling interest 18 - - - (45.1) (45.1) (53.2) (98.3)
Dividend paid in the period - - - (118.6) (118.6) - (118.6)
Balance as at 30 September 2016 0.2 210.4 304.4 990.4 1,505.4 5.4 1,510.8
CONDENSED GROUP STATEMENT OF CASH FLOWS - UNAUDITED
Note Six months to Six months to Audited
30 September 2016 30 September 2015 Year to
£m £m 31 March
2016
£m
Cash flows from operating activities
Operating profit 102.4 144.2 402.9
Depreciation 58.3 53.5 111.9
Amortisation 18.6 17.1 35.2
Net impairment of intangible assets 8 18.6 - -
Net impairment of property, plant and equipment 9 10.8 3.7 26.5
Loss on disposal of property, plant and equipment and intangible assets 1.7 0.6 1.2
Losses on derivative instruments 6.3 1.4 3.1
Charges in respect of employee share incentive schemes 5.3 3.3 (0.3)
Proceeds/(Payment) from settlement of equity swap contracts - 0.3 (1.6)
Increase in inventories (60.9) (42.9) (49.3)
Decrease/(Increase) in receivables 24.6 (2.4) (31.7)
(Decrease)/Increase in payables (3.8) (11.4) 5.1
Cash generated from operating activities 181.9 167.4 503.0
Interest received 2.4 2.7 4.8
Interest paid (0.8) (1.0) (1.7)
Taxation paid (65.2) (56.4) (94.8)
Net cash generated from operating activities 118.3 112.7 411.3
Cash flows from investing activities
Purchase of property, plant and equipment (28.5) (67.2) (107.3)
Purchase of intangible assets (14.7) (12.9) (30.7)
Proceeds from sale of property, plant and equipment - 0.5 0.5
Net cash outflow from investing activities (43.2) (79.6) (137.5)
Cash flows from financing activities
Dividends paid in the year (118.6) (112.5) (157.7)
Dividends paid to non-controlling interest - - (0.7)
Payment to acquire additional interest in subsidiary from non-controlling interest 18 (68.8) - -
Issue of ordinary share capital 0.6 0.9 2.2
Purchase of own shares by ESOP trusts (11.3) - (10.9)
Purchase of shares through share buy-back (32.4) - -
Net cash outflow from financing activities (230.5) (111.6) (167.1)
Net (decrease)/increase in cash and cash equivalents (155.4) (78.5) 106.7
Effect of exchange rate changes 24.2 (14.9) 1.4
Cash and cash equivalents at beginning of period 660.3 552.2 552.2
Cash and cash equivalents at end of period 529.1 458.8 660.3
ANALYSIS OF NET CASH - UNAUDITED Note As at As at Audited
30 September 2016 30 September 2015 As at
£m £m 31 March 2016
£m
Cash and cash equivalents as per the Balance Sheet 568.4 520.6 711.8
Bank overdrafts 13 (39.3) (61.8) (51.5)
Net cash 529.1 458.8 660.3
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 2016, and the
Condensed Group Balance Sheet as at 30 September 2016 and related notes have
been reviewed by the auditors and their report to the Company is set out on
page 35. 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 2016 were
approved by the Board of Directors on 17 May 2016 and have been filed with the
Registrar of Companies. The report of the auditors on the statutory accounts
for the year ended 31 March 2016 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 2016 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 2016, 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 2016.
Accounting policies
Accounting policies and presentation are consistent with those applied in the
Group's financial statements for the year ended 31 March 2016, as set out on
pages 128 to 136 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 2016,
as set out on pages 127 and 128 of those financial statements, with the
exception of taxation, as described above and the assessment of the future
payments to the non-controlling interest in Burberry Middle East LLC as
deferred consideration. Refer to note 18 for further details on this
transaction.
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 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 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. Interest
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
2016 2015 2016 2015 2016 2015
£m £m £m £m £m £m
Retail 859.0 773.6 - - 859.0 773.6
Wholesale 286.7 304.8 - - 286.7 304.8
Licensing - - 13.9 27.2 13.9 27.2
Total segment revenue 1,145.7 1,078.4 13.9 27.2 1,159.6 1,105.6
Inter-segment revenue(1) - - (1.1) (1.1) (1.1) (1.1)
Revenue from external customers 1,145.7 1,078.4 12.8 26.1 1,158.5 1,104.5
Adjusted operating profit 133.5 129.7 11.0 22.0 144.5 151.7
Adjusting items(2) (44.2) 1.8
Finance income 2.6 2.6
Finance expense (0.9) (1.4)
Profit before taxation 102.0 154.7
Year to 31 March 2016 Retail / Wholesale Licensing Total
£m £m £m
Retail 1,837.7 - 1,837.7
Wholesale 634.6 - 634.6
Licensing - 44.7 44.7
Total segment revenue 2,472.3 44.7 2,517.0
Inter-segment revenue(1) - (2.3) (2.3)
Revenue from external customers 2,472.3 42.4 2,514.7
Adjusted operating profit 380.9 36.9 417.8
Adjusting items(2) (5.0)
Finance income 5.1
Finance expense (2.3)
Profit before taxation 415.6
(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 Note 4 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
2016 2015 2016
£m £m £m
Asia Pacific 409.9 377.3 932.9
EMEIA(1) 455.6 415.7 878.5
Americas 280.2 285.4 660.9
Retail/Wholesale 1,145.7 1,078.4 2,472.3
Licensing 12.8 26.1 42.4
Total 1,158.5 1,104.5 2,514.7
(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, adjusted operating
profit is usually expected to be higher in the second half of the year.
4. Adjusting items
Six months to Six months to Year to
30 September 30 September 31 March
2016 2015 2016
£m £m £m
Adjusting operating items
- charge relating to the fragrance and beauty licence intangible 26.1 7.5 14.9
- restructuring costs 12.8 - -
- revaluation of deferred consideration liability 3.2 - -
Total adjusting operating items 42.1 7.5 14.9
Adjusting financing items
- put option liability finance charge/(income) 1.0 (9.3) (9.9)
- finance charge on deferred consideration liability 1.1 - -
Total adjusting financing items 2.1 (9.3) (9.9)
Charge relating to 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 was being amortised on a straight line basis
over the period 1 April 2013 to 31 December 2017.
During the six months ended 30 September 2016, amortisation expense of £7.5m
was recognised in relation to the fragrance and beauty licence intangible (six
months ended 30 September 2015: £7.5m; year ended 31 March 2016: £14.9m). At
30 September 2016, management carried out an impairment assessment of the
carrying value of this asset based on a value-in-use calculation using latest
estimates for cost and revenue projections. As a result of a reduction in
projected revenue, compared to previous estimates, over the remaining asset
life to 31 December 2017, management have concluded that the book value of the
asset is not supported by its value-in-use. An impairment charge of £18.6m
has been recognised at 30 September 2016, to write the remaining balance of
the intangible asset down to nil.
The total charge of £26.1m has been 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. A related tax credit of
£5.1m (30 September 2015: £1.5m; 31 March 2016: £2.8m) has also been
recognised in the current period.
Restructuring costs
Restructuring costs of £12.8m were incurred in the period, arising as a result
of the Group's cost and efficiency programme announced in May 2016. These
costs are presented as an adjusting item as they are considered material and
one-off in nature, being part of a restructuring programme running from May
2016 to March 2018. The most significant element of the restructuring costs
relates to redundancies, with the remainder relating to consultancy costs,
legal advice and project assurance. £9.3m of the cost was settled in the
period with the balance being accrued at 30 September 2016. A related tax
credit of £2.6m has also been recognised in the current period.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
4. Adjusting items (continued)
Items relating to the deferred consideration liability
On 22 April 2016, the Group entered into an agreement to transfer the economic
right to the non-controlling interest in Burberry Middle East LLC to the Group
in consideration of contingent payments to be made to the minority shareholder
relating to an agreed percentage of the future revenue of Burberry Middle East
LLC and its subsidiaries, Burberry Al Kuwait General Trading Textiles and
Accessories Company WLL and Burberry Qatar WLL, over the period 2016 to 2023,
together with fixed payments of AED 120.0m (£22.6m), relating to profits of
Burberry Middle East LLC up to 31 March 2016, to be paid over the period 2016
to 2019. A liability for the present value of the fixed and contingent
deferred consideration of AED 236.0m (£44.6m) was recognised at this point.
Refer to note 11 for further details of the deferred consideration liability.
A charge of £3.2m in relation to the revaluation of this balance has been
recognised in operating expenses for the six months ended 30 September 2016.
A financing charge of £1.1m in relation to the unwinding of the discount on
the non-current portion of the deferred consideration liability has also been
recognised for the six months ended 30 September 2016. These movements are
unrealised. No tax has been recognised on either of these items, as the
future payments are not considered to be deductible for tax purposes. These
items are presented as adjusting items in accordance with the Group accounting
policy, as they arise from changes in the value of the liability for expected
future payments relating to the purchase of a non-controlling interest in the
Group.
Put option liability finance charge/income
The financing charge of £1.0m for the six months ended 30 September 2016
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 2015:
income of £9.3m; year ended 31 March 2016: income of £9.9m). 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. This item has been presented as
an adjusting item in accordance with the Group accounting policy as it arises
from changes in the value of the liability for expected future payments
relating to the purchase of a non-controlling interest in the Group. Refer to
note 11 for further details of the put option liability.
5. Taxation
The tax charge for the six months ended 30 September 2016 has been calculated
based on an estimated effective underlying rate of tax on adjusted profit
before taxation for the full year of 25.0% (30 September 2015: 23.0%; year
ended 31 March 2016: 24.7%). 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 28.3% (30 September 2015: 21.8%; 31 March
2016: 24.3%).
Total taxation recognised in the Condensed Group Income Statement comprises:
Six months to Six months to Year to
30 September 30 September 31 March
2016 2015 2016
£m £m £m
Tax on adjusted profit before taxation 36.6 35.2 103.8
Tax on adjusting items (note 4) (7.7) (1.5) (2.8)
Total taxation charge 28.9 33.7 101.0
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
2016 2015 2016
£m £m £m
Attributable profit for the period before adjusting items(1) 108.5 116.2 311.7
Effect of adjusting items(1) (after taxation) (36.5) 3.3 (2.2)
Attributable profit for the period 72.0 119.5 309.5
(1) None of the adjusting items impact non-controlling interests. Refer to
Note 4 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').
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
6. Earnings per share (continued)
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
2016 2015 2016
Millions Millions Millions
Weighted average number of ordinary shares in issue during the period 441.5 441.6 441.9
Dilutive effect of the share incentive schemes 2.8 5.6 4.2
Diluted weighted average number of ordinary shares in issue during the period 444.3 447.2 446.1
7. Dividends
The interim dividend of 10.5p (2015: 10.2p) per share has been approved by the
Board of Directors after 30 September 2016. Accordingly, this dividend has not
been recognised as a liability at the period end.
The interim dividend will be paid on 27 January 2017 to Shareholders on the
Register at the close of business on 23 December 2016.
A dividend of 26.8p (2015: 25.5p) per share was paid during the period ended
30 September 2016 in relation to the year ended 31 March 2016.
8. Intangible assets
Goodwill at 30 September 2016 is £97.8m (2015: £84.1m). There were no
additions to goodwill in the period.
In the period there were additions to other intangible assets of £14.9m (2015:
£15.0m) and disposals with a net book value of £0.8m (2015: £nil).
Capital commitments contracted but not provided for by the Group amounted to
£3.4m (2015: £0.8m).
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 2016.
Management has performed a review for indicators of impairment as at 30
September 2016. There is no indication that the goodwill may be impaired. The
annual impairment test will be performed at 31 March 2017.
For the six months ended 30 September 2016, an impairment charge of £18.6m
(2015: £nil) was recorded to write the carrying value of the fragrance and
beauty licence intangible asset down to nil. Refer to note 4 for further
details.
9. Property, plant and equipment
In the period there were additions to property, plant and equipment of £31.9m
(2015: £79.8m) and disposals with a net book value of £0.9m (2015: £0.6m).
Capital commitments contracted but not provided for by the Group amounted to
£14.6m (2015: £16.3m).
Impairment testing
For the six months ended 30 September 2016, a net impairment charge of £13.8m
(2015: £2.2m) was recorded as a result of a review of impairment of retail
store assets. A charge of £10.8m (2015: £3.7m) was recognised against
property, plant and equipment, and £3.0m (2015: reversal of £1.5m) was charged
in relation to onerous lease provisions. Refer to note 12 for further details
of onerous lease provisions. The net impairment charge relates to 10 retail
cash generating units (2015: 17 retail cash generating units) for which the
total recoverable amount at the balance sheet date is £2.8m (2015: £8.3m).
Where indicators of impairment were identified, the impairment review compared
the value-in-use of the assets to the carrying values at 30 September 2016.
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 budget 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 were between 11.4% and
19.7% (2015: between 12.1% and 18.3%) based on the Group's weighted average
cost of capital adjusted for country-specific tax rates and risks. Where the
value-in-use was negative, onerous lease provisions were assessed in relation
to the future contracted minimum lease payments. Potential alternative uses
for property, such as subletting of leasehold or sale of freehold, were
considered in estimating both the value for impairment charges and onerous
lease provisions.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
10. Trade and other receivables
As at As at As at
30 September 2016 30 September 2015 31 March
£m £m 2016
£m
Non-current
Deposits and other receivables 48.1 37.1 37.5
Other non-financial receivables 3.6 3.1 2.8
Prepayments 28.4 25.5 26.2
Total non-current trade and other receivables 80.1 65.7 66.5
Current
Trade receivables 181.4 177.1 205.1
Provision for doubtful debts (9.1) (4.1) (7.2)
Net trade receivables 172.3 173.0 197.9
Other financial receivables 16.6 20.6 20.9
Other non-financial receivables 24.0 20.6 27.5
Prepayments 48.5 39.6 35.4
Accrued income 2.8 2.3 3.7
Total current trade and other receivables 264.2 256.1 285.4
Total trade and other receivables 344.3 321.8 351.9
11. Trade and other payables
As at As at As at
30 September 2016 30 September 2015 31 March2016
£m £m £m
Non-current
Put option liability over non-controlling interest -- 44.0 45.8
Other payables 2.4 3.5 3.0
Deferred income and non-financial accruals 70.5 64.3 65.9
Deferred consideration 29.2 - -
Total non-current trade and other payables 102.1 111.8 114.7
Current
Trade payables 176.1 168.8 167.2
Other taxes and social security costs 49.6 53.6 58.3
Other payables 76.2 14.5 3.9
Accruals 151.1 153.1 132.4
Deferred income and non-financial accruals 21.5 17.9 25.4
Deferred consideration 4.6 - -
Total current trade and other payables 479.1 407.9 387.2
Total trade and other payables 581.2 519.7 501.9
Included in current Other payables is £66.7m (2015: £nil) relating to the cost
of shares not yet purchased, under an agreement to purchase its own shares
entered into by the Company, together with anticipated stamp duty arising.
Refer to note 14 for further details.
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, held a 15% economic
interest in the Group's business in China. Put and call options were granted
over this interest stake which were 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 was recognised as a
non-current financial liability under IAS 39. On 1 August 2016, the Group
exercised the call option relating to the economic interest. As a result, the
put option expired at this date.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
11. Trade and other payables (continued)
The value of the put option liability is £nil at the period end (30 September
2015: £44.0m; 31 March 2016: £45.8m). The movement in the liability for the
period includes an increase of £1.0m relating to unrealised fair value
movements, as described in note 4, together with an increase due to the impact
of translation of the put option liability to the Group's presentational
currency, combined with the derecognition of £51.0m on its expiry. Refer to
note 18 for further details.
Deferred consideration
Following the purchase of the economic right to the non-controlling interest
in Burberry Middle East LLC on 22 April 2016, the Group has recognised a
liability in relation to the deferred consideration for this transaction.
Refer to note 18 for further details of this transaction. The deferred
consideration consists of fixed payments to be paid over the period 2016 to
2019, and contingent payments calculated as an agreed percentage of the future
revenue of Burberry Middle East LLC and its subsidiaries, over the period 2016
to 2023.
The fair value of the deferred consideration relating to fixed payments is
considered to be a level 2 measurement. The amount recognised has been derived
via a present value calculation of the remaining fixed payments of AED 39.3m
(£8.2m) discounted at an appropriate risk free rate applicable to Burberry
Middle East LLC.
The fair value of the deferred consideration relating to the contingent
payments is considered to be a level 3 measurement (refer to note 17 for
details of the fair value hierarchy classification for financial instruments).
The amount recognised has been estimated using a present value calculation,
incorporating observable and non-observable inputs. This valuation technique
has been adopted as it reflects the contractual arrangement. The inputs
applied in arriving at the value of this component of the deferred
consideration are an estimate of the future revenue of Burberry Middle East
LLC and its subsidiaries from 2016 to 2023 and an appropriate risk adjusted
discount rate for Burberry Middle East LLC.
The carrying value of the deferred consideration relating to contingent
payments is dependent on assumptions applied in determining these inputs, and
is subject to change in the event that there is a change in any of 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 estimate of future revenues of Burberry Middle
East and its subsidiaries would result in a £2.6m increase/decrease in the
carrying value of the deferred consideration relating to contingent payments
at 30 September 2016 and a corresponding £2.6m decrease/ increase in the
profit before taxation for the period ended 30 September 2016.
12. Provisions for other liabilities and charges
Property obligations Other Total
£m costs £m
£m
As at 1 April 2016 51.8 4.2 56.0
Effect of foreign exchange rate changes 5.4 0.1 5.5
Created during the period 5.1 0.2 5.3
Utilised during the period (5.9) (0.9) (6.8)
Released during the period (1.4) (1.7) (3.1)
As at 30 September 2016 55.0 1.9 56.9
As at 30 September 2015 29.5 2.7 32.2
As at As at As at
30 September 2016 30 September 2015 31 March 2016
£m £m £m
Analysis of total provisions:
Non-current 43.7 22.5 38.4
Current 13.2 9.7 17.6
Total 56.9 32.2 56.0
Within property obligations are amounts of £27.1m (2015: £6.9m) relating to
onerous lease obligations. Refer to note 9 for details relating to impairment
of assets and onerous lease provisions for retail cash generating units.
The net charge for the period for onerous lease obligations is £3.0m (2015:
credit of £1.5m), which all relates to retail stores.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
13. Bank overdrafts and borrowings
Included within bank overdrafts is £34.6m (2015: £57.2m) 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 2016,
the Group held bank overdrafts of £4.7m (2015: £4.6m) 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. At 30 September 2016, there
were £nil outstanding drawings. Since the period end the Group exercised an
option to extend the maturity of the facility to November 2021, after
receiving consent 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 2015 444.7 0.2
Allotted on exercise of options during the period 0.2 -
As at 30 September 2015 444.9 0.2
As at 1 April 2016 445.0 0.2
Allotted on exercise of options during the period 0.1 -
As at 30 September 2016 445.1 0.2
Other reserves
During the period the Company entered into an agreement to purchase £100m of
its own shares as part of a share buy-back programme. Own shares purchased by
the Company, as part of a share buy-back programme, are classified as treasury
shares and their cost offset against retained earnings. When treasury shares
are cancelled, a transfer is made from retained earnings to capital redemption
reserve, equivalent to the nominal value of the shares purchased and
subsequently cancelled. The cost of shares purchased by employee share
ownership trusts (ESOP trusts) are offset against retained earnings.
As at 30 September 2016 the amount held against this reserve was £33.8m (2015:
£nil) including stamp duty of £0.2m (2015: £nil) in relation to treasury
shares and £48.3m (2015: £32.7m) in relation to shares purchased by ESOP
trusts. As at 30 September 2016, the company held 2.5m (2015: nil) treasury
shares, with a market value of £35.0m (2015: £nil) and ESOP trusts held 3.7m
(2015: 2.4m) shares in the Company, with a market value of £51.5m (2015:
£32.8m). In the six months ended 30 September 2016 the Burberry Group plc ESOP
trust waived its entitlement to dividends of £0.7m (2015: £1.0m).
£66.7m (2015: £nil), relating to the cost of shares not yet purchased under
this agreement including anticipated stamp duty arising of £0.3m, has been
charged to retained earnings in the period, with the payment obligation
recognised in other payables (see note 11).
15. Related party disclosures
The Group's significant related parties are disclosed in the Annual Report for
the year ended 31 March 2016. 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.
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
2016 2015 2016
Euro 1.22 1.39 1.36
US Dollar 1.37 1.54 1.50
Chinese Yuan Renminbi 9.08 9.62 9.57
Hong Kong Dollar 10.65 11.94 11.67
Korean Won 1,565 1,743 1,740
Closing
As at As at As at
30 September 30 September 31 March
2016 2015 2016
Euro 1.16 1.35 1.26
US Dollar 1.30 1.51 1.44
Chinese Yuan Renminbi 8.69 9.61 9.29
Hong Kong Dollar 10.09 11.72 11.16
Korean Won 1,429 1,793 1,640
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 12 months in advance of royalty receipts, was Yen 175.9:
£1 in the six months ended 30 September 2016 (six months ended 30 September
2015: Yen 174.7: £1; year ended 31 March 2016: Yen 177.1: £1).
17. Fair value disclosures for financial instruments
The Group classifies its instruments into the following categories:
Financial
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