REG - Burberry Group PLC - Preliminary Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 2
18/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSR4813Fa
on the retranslation of the opening net investment in
subsidiary companies, and on the translation of their results, are taken
directly to the foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
The principal exchange rates used were as follows:
Average rate Closing rate
Year to Year to As at As at
31 March 31 March 31 March 31 March
2017 2016 2017 2016
Euro 1.19 1.36 1.17 1.26
US Dollar 1.30 1.50 1.25 1.44
Chinese Yuan Renminbi 8.73 9.57 8.62 9.29
Hong Kong Dollar 10.11 11.67 9.74 11.16
Korean Won 1,487 1,740 1,402 1,640
The average exchange rate achieved by the Group on its Yen royalty income,
taking into account its use of Yen forward foreign exchange contracts executed
on a monthly basis approximately 12 months in advance of royalty receipts, was
Yen 159.3: £1 in the year to 31 March 2017 (2016: Yen 177.1: £1).
Notes to the Financial Statements
3. Adjusted profit before taxation
In order to provide additional consideration of the underlying performance of
the Group's ongoing business, the Group's results include a presentation of
Adjusted profit before taxation ('adjusted PBT'). Adjusted PBT is defined as
profit before taxation and before adjusting items. Adjusting items are those
items which, in the opinion of the directors, should be excluded in order to
provide a consistent and comparable view of the performance of the Group's
ongoing business. Generally this will include those items that are largely
one-off and material in nature as well as income or expenses relating to
acquisitions or disposals of businesses or other transactions of a similar
nature, including the impact of changes in fair value of expected future
payments or receipts relating to these transactions. Adjusting items are
identified and presented on a consistent basis each year and a reconciliation
of adjusted PBT to profit before tax is included in the financial statements.
Adjusting items and their related tax impacts are added back to/deducted from
profit attributable to owners of the Company to arrive at adjusted earnings
per share. Refer to note 7 for further details of adjusting items.
4. Segmental analysis
The Chief Operating Decision Maker has been identified as the Board of
Directors. The Board reviews the Group's internal reporting in order to assess
performance and allocate resources. Management has determined the operating
segments based on the reports used by the Board. The Board considers the
Group's business through its two channels to market, being retail/wholesale
and licensing.
Retail/wholesale revenues are generated by the sale of luxury goods through
Burberry mainline stores, concessions, outlets and digital commerce as well as
Burberry franchisees, prestige department stores globally and multi-brand
specialty accounts. The flow of global product between retail and wholesale
channels and across our regions is monitored and optimised at a corporate
level and implemented via the Group's inventory hubs situated in Asia, Europe
and the USA.
Licensing revenues are generated through the receipt of royalties from global
licensees of eyewear, timepieces and European childrenswear, and from licences
relating to the use of non-Burberry trade marks 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
Year to Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March 31 March
2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m
Retail 2,127.2 1,837.7 - - 2,127.2 1,837.7
Wholesale 613.9 634.6 - - 613.9 634.6
Licensing - - 27.1 44.7 27.1 44.7
Total segment revenue 2,741.1 2,472.3 27.1 44.7 2,768.2 2,517.0
Inter-segment revenue1 - - (2.2) (2.3) (2.2) (2.3)
Revenue from external customers 2,741.1 2,472.3 24.9 42.4 2,766.0 2,514.7
Depreciation and amortisation2 144.0 132.2 - - 144.0 132.2
Net impairment of intangible assets3 7.1 - - - 7.1 -
Net impairment of property, plant and equipment 15.9 26.5 - - 15.9 26.5
Other non-cash items:
Share-based payments 13.1 (0.3) - - 13.1 (0.3)
Adjusted operating profit 437.0 380.9 21.7 36.9 458.7 417.8
Adjusting items4 (67.6) (5.0)
Finance income 5.5 5.1
Finance expense (1.8) (2.3)
Profit before taxation 394.8 415.6
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 Amortisation of £7.5m (2016: £14.9m) relating to the fragrance and beauty
licence intangible asset is presented as an adjusting item and excluded from
the segmental analysis.
3 Impairment of £18.6m (2016: £nil) relating to the fragrance and beauty
licence intangible asset and impairment of £7.3m (2016: £nil) of software
assets specifically relating to the transfer of the Beauty operations are
presented as adjusting items and excluded from the segmental analysis.
4 Refer to note 7 for details of adjusting items.
Notes to the Financial Statements
4. Segmental analysis (continued)
Segmental asset analysis
Retail/Wholesale Licensing Total
Year to Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March 31 March
2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m
Additions to non-current assets 112.1 146.2 - - 112.1 146.2
Total segment assets 1,332.5 1,365.5 3.6 3.5 1,336.1 1,369.0
Goodwill 99.6 88.8
Cash and cash equivalents 843.5 711.8
Taxation 134.2 137.4
Assets relating to discontinued Spanish operations - 7.3
Total assets per Balance Sheet 2,413.4 2,314.3
Additional revenue analysis
Revenue by product division Year to Year to
31 March 31 March
2017 2016
£m £m
Accessories 1,033.2 901.7
Womens 791.9 729.0
Mens 623.5 548.4
Childrens/Other 108.1 90.7
Beauty 184.4 202.5
Retail/Wholesale 2,741.1 2,472.3
Licensing 24.9 42.4
Total 2,766.0 2,514.7
Revenue by destination Year to Year to
31 March 31 March
2017 2016
£m £m
Asia Pacific 1,069.0 932.9
EMEIA1 991.2 878.5
Americas 680.9 660.9
Retail/Wholesale 2,741.1 2,472.3
Licensing 24.9 42.4
Total 2,766.0 2,514.7
1 EMEIA comprises Europe, Middle East, India and Africa.
Entity-wide disclosures
Revenue derived from external customers in the UK totalled £300.9m for the
year to 31 March 2017 (2016: £250.2m).
Revenue derived from external customers in foreign countries totalled
£2,465.1m for the year to 31 March 2017 (2016: £2,264.5m). This amount
includes £576.6m of external revenues derived from customers in the USA (2016:
£562.1m) and £413.7m of external revenues derived from customers in China
(2016: £350.9m).
The total of non-current assets other than financial instruments and deferred
tax assets located in the UK is £147.6m (2016: £194.6m). The remaining £456.2m
of non-current assets are located in other countries (2016: £452.6m), with
£159.6m located in the USA (2016: £153.1m), £76.7m located in China (2016:
£82.0m), and £72.4m located in Korea (2016: £58.9m).
Notes to the Financial Statements
5. Net operating expenses
Note Year to Year to
31 March 31 March2016£m
2017
£m
Selling and distribution costs 913.5 816.7
Administrative expenses 560.9 528.2
Adjusting operating items 7 64.4 14.9
Net operating expenses 1,538.8 1,359.8
6. Profit before taxation
Note Year to Year to
31 March 31 March
2017 2016
£m £m
Adjusted profit before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment
Within cost of sales 1.6 1.4
Within selling and distribution costs 107.4 98.7
Within administrative expenses 12.3 11.8
Amortisation of intangible assets
Within selling and distribution costs 1.0 1.8
Within administrative expenses1 21.7 18.5
Loss on disposal of property, plant and equipment and intangible assets 3.5 1.2
Net impairment of intangible assets2 12 7.1 -
Net impairment of property, plant and equipment 13 15.9 26.5
Employee costs3,4 484.7 427.5
Operating lease rentals
Minimum lease payments5 239.0 235.3
Contingent rents 108.6 86.1
Net exchange gain on revaluation of monetary assets and liabilities (12.2) (1.6)
Net exchange loss on derivatives held for trading for the year 0.2 5.8
Trade receivables net impairment charge 2.4 3.1
Adjusting items
Adjusting operating items
Charge relating to the fragrance and beauty licence intangible asset 7 26.1 14.9
Restructuring costs 7 20.8 -
Revaluation of deferred consideration liability 7 3.0 -
Costs relating to the transfer of the Beauty operations 7 14.5 -
Total adjusting operating items 64.4 14.9
Adjusting financing items
Put option liability finance charge/(income) 7 1.0 (9.9)
Finance charge on deferred consideration liability 7 2.2 -
Total adjusting financing items 3.2 (9.9)
1 Amortisation of intangible assets within administrative expenses has been
presented excluding amortisation of £7.5m (2016: £14.9) relating to the
fragrance and beauty licence intangible, which has been presented as adjusting
(refer to note 7).
2 Net impairment of intangible assets for the year ended 31 March 2017 is
presented excluding an impairment of £18.6m relating to the fragrance and
beauty licence intangible and an impairment of £7.3m of software assets
specifically relating to the transfer of the Beauty operations, which have
been presented as adjusting (refer to note 7).
3 Employee costs for the year ended 31 March 2017 are presented excluding
£9.7m of costs arising as a result of the cost-efficiency programme, which are
presented as adjusting (refer to note 7).
4 Employee costs for the year ended 31 March 2016 have been re-presented to
include employee-related costs recognised within cost of sales.
5 Minimum lease payments include charges for onerous lease provisions
during the year ended 31 March 2017 of £7.9m (2016: £20.1m) and does not
include payments of £8.3m (2016: £5.0m) where existing onerous lease
provisions have been utilised.
Notes to the Financial Statements
7. Adjusting items
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. 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 over the remaining life to 31 December 2017, compared to
previous estimates, management concluded that the book value of the asset was
not supported by its value-in-use. An impairment charge of £18.6m was
recognised at 30 September 2016, to write the remaining balance of the
intangible asset down to nil.
The total charge in relation to the fragrance and beauty licence intangible
for the year ended 31 March 2017 is £26.1m (2016: £14.9m). This 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 (2016: £2.8m) has also been
recognised in the current period.
Restructuring costs
Restructuring costs of £20.8m were incurred in the current period, arising as
a result of the Group's cost-efficiency programme announced in May 2016. These
costs are presented as an adjusting item as they are considered material and
one-off in nature, being part of a restructuring programme running from May
2016 to March 2019, with restructuring costs being incurred in the first two
years. The most significant elements of the restructuring costs relate to
redundancies and consultancy costs supporting organisational design and
development of strategic growth and productivity initiatives, with the
remainder relating to legal advice and project assurance. £16.7m of this cost
was settled in the period with the balance being accrued at 31 March 2017. A
related tax credit of £4.2m has also been recognised in the current period.
Items relating to the deferred consideration liability
On 22 April 2016, the Group entered into an agreement to transfer the economic
right 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 17 for further details of the deferred consideration liability.
A charge of £3.0m in relation to the revaluation of this balance has been
recognised in operating expenses for the year ended 31 March 2017. A financing
charge of £2.2m in relation to the unwinding of the discount on the
non-current portion of the deferred consideration liability has also been
recognised for the year ended 31 March 2017. 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 year ended 31 March 2017 (2016: income
of £9.9m) relates to 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. 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 17 for further details of
the carrying value of the put option liability.
Notes to the Financial Statements
7. Adjusting items (continued)
Costs relating to the transfer of the Beauty operations
On 3 April 2017 Burberry entered into an agreement with Coty Geneva SARL
Versoix (Coty) to grant Coty a licence for its fragrance and beauty products
and to transfer Burberry's Beauty operations to Coty. This agreement is
expected to complete in October 2017. The licence agreement and the business
transfer will be accounted for in the financial statements for the year ending
31 March 2018. Further details of the agreement to transfer the beauty
operations business are set out in note 25.
Costs of £14.5m arising in relation to the transaction have been incurred and
recognised in the current period. These costs related to the write-off of
software assets specifically relating to the Beauty operations of £7.3m (refer
to note 12); a provision for the termination of a distributor agreement; and
other ancillary charges incurred. None of these costs were paid in the period.
These costs are presented as an adjusting item in accordance with the Group's
accounting policy as they arise in relation to the transfer of a business. A
related tax credit of £2.9m has also been recognised in the period.
8. Financing
Note Year to Year to
31 March 31 March
2017 2016
£m £m
Bank interest income 5.0 4.6
Other finance income 0.5 0.5
Finance income 5.5 5.1
Interest expense on bank loans and overdrafts (1.0) (1.5)
Bank charges (0.7) (0.7)
Other finance expense (0.1) (0.1)
Finance expense (1.8) (2.3)
Put option liability finance (charge)/income 7 (1.0) 9.9
Finance charge on deferred consideration liability 7 (2.2) -
Other financing (charge)/income (3.2) 9.9
Net finance income 0.5 12.7
9. Taxation
Analysis of charge for the year recognised in the Group Income Statement:
Year to Year to
31 March 31 March
2017 2016
£m £m
Current tax
UK corporation tax
Current tax on income for the year to 31 March 2017 at 20% (2016: 20%) 48.2 52.8
Double taxation relief (0.8) (0.8)
Adjustments in respect of prior years (3.3) (3.1)
44.1 48.9
Foreign tax
Current tax on income for the year 45.3 49.1
Adjustments in respect of prior years (6.3) (2.0)
Total current tax 83.1 96.0
Deferred tax
UK deferred tax
Origination and reversal of temporary differences (0.2) 9.9
Impact of changes to tax rates 0.8 1.3
Adjustments in respect of prior years (0.4) (0.7)
0.2 10.5
Foreign deferred tax
Origination and reversal of temporary differences 19.7 (13.1)
Impact of changes to tax rates (0.2) -
Adjustments in respect of prior years 4.3 7.6
Total deferred tax 24.0 5.0
Total tax charge on profit 107.1 101.0
Notes to the Financial Statements
9. Taxation (continued)
Analysis of charge for the year recognised in other comprehensive income and
directly in equity:
Year to Year to
31 March 31 March
2017 2016
£m £m
Current tax
Recognised in other comprehensive income
Current tax charge on exchange differences on loans (foreign currency translation reserve) 5.4 1.9
Current tax charge on cash flow hedges deferred in equity (hedging reserve) 1.9 -
Current tax credit on net investment hedges deferred in equity (hedging reserve) (0.6) -
Total current tax recognised in other comprehensive income 6.7 1.9
Recognised in equity
Current tax credit on share options (retained earnings) (0.4) (2.0)
Total current tax recognised directly in equity (0.4) (2.0)
Deferred tax
Recognised in other comprehensive income
Deferred tax charge on cash flow hedges deferred in equity (hedging reserve) - 1.5
Deferred tax (credit)/charge on cash flow hedges transferred to income (hedging reserve) (0.9) 0.7
Deferred tax charge/(credit) on net investment hedges deferred in equity (hedging reserve) 0.1 (0.1)
Deferred tax credit on net investment hedges transferred to income (hedging reserve) - (0.5)
Total deferred tax recognised in other comprehensive income (0.8) 1.6
Recognised in equity
Deferred tax (credit)/charge on share options (retained earnings) (0.5) 6.5
Total deferred tax recognised directly in equity (0.5) 6.5
The tax rate applicable on profit varied from the standard rate of corporation
tax in the UK due to the following factors:
Year to Year to
31 March 31 March
2017 2016
£m £m
Profit before taxation 394.8 415.6
Tax at 20% (2016: 20%) on profit before taxation 79.0 83.1
Rate adjustments relating to overseas profits 14.1 3.4
Permanent differences 5.7 5.5
Tax on dividends not creditable 6.1 1.6
Current year tax losses not recognised 5.5 4.7
Prior year tax losses recognised in the year - (0.4)
Prior year tax losses no longer recognised 1.8 -
Adjustments in respect of prior years (5.7) 1.8
Adjustments to deferred tax relating to changes in tax rates 0.6 1.3
Total taxation charge 107.1 101.0
Total taxation recognised in the Group Income Statement arises on:
Year to Year to
31 March 31 March
2017 2016
£m £m
Adjusted profit before taxation 119.3 103.8
Adjusting items (12.2) (2.8)
Total taxation charge 107.1 101.0
Notes to the Financial Statements
10. Earnings per share
The calculation of basic earnings per share is based on profit or loss
attributable to owners of the Company for the year divided by the weighted
average number of ordinary shares in issue during the year. Basic and diluted
earnings per share based on adjusted profit before taxation are also disclosed
to indicate the underlying profitability of the Group.
Year to Year to
31 March 31 March
2017 2016
£m £m
Attributable profit for the year before adjusting items1 342.2 311.7
Effect of adjusting items1 (after taxation) (55.4) (2.2)
Attributable profit for the year 286.8 309.5
1 Refer to note 7 for details of adjusting items.
The weighted average number of ordinary shares represents the weighted average
number of Burberry Group plc ordinary shares in issue throughout the year,
excluding ordinary shares held in the Group's ESOP trusts.
Diluted earnings per share is based on the weighted average number of ordinary
shares in issue during the year. In addition, account is taken of any options
and awards made under the employee share incentive schemes, which will have a
dilutive effect when exercised.
Year to Year to
31 March 31 March
2017 2016
Millions Millions
Weighted average number of ordinary shares in issue during the year 439.1 441.9
Dilutive effect of the employee share incentive schemes 3.1 4.2
Diluted weighted average number of ordinary shares in issue during the year 442.2 446.1
11. Dividends paid to owners of the Company
Year to Year to
31 March 31 March
2017 2016
£m £m
Prior year final dividend paid 26.8p per share (2016: 25.5p) 118.6 112.5
Interim dividend paid 10.5p per share (2016: 10.2p) 45.8 45.2
Total 164.4 157.7
A final dividend in respect of the year to 31 March 2017 of 28.4p (2016:
26.8p) per share, amounting to £123.6m, has been proposed for approval by the
shareholders at the Annual General Meeting subsequent to the balance sheet
date. The final dividend to Burberry Group plc shareholders has not been
recognised as a liability at the year end and will be paid on 4 August 2017 to
shareholders on the register at the close of business on 7 July 2017.
Notes to the Financial Statements
12. Intangible assets
Cost Goodwill Trade marks, licences and other intangible assets ComputerSoftware1£m Intangible assets in the course ofconstruction£m Total
£m £m £m
As at 31 March 2015 88.8 87.0 121.0 12.2 309.0
Effect of foreign exchange rate changes - 0.5 0.2 - 0.7
Additions - 0.6 9.0 21.6 31.2
Disposals - (0.2) (7.3) - (7.5)
Reclassifications from assets in the course - - 10.8 (10.8) -
of construction
As at 31 March 2016 88.8 87.9 133.7 23.0 333.4
Effect of foreign exchange rate changes 10.8 0.6 3.7 - 15.1
Additions - 0.3 14.9 18.9 34.1
Disposals - - (7.5) (1.5) (9.0)
Reclassifications from assets in the course - - 20.1 (20.1) -
of construction
As at 31 March 2017 99.6 88.8 164.9 20.3 373.6
Accumulated amortisation and impairment
As at 31 March 2015 - 37.1 78.4 - 115.5
Effect of foreign exchange rate changes - 0.3 0.3 - 0.6
Charge for the year - 16.0 19.2 - 35.2
Disposals - (0.2) (7.3) - (7.5)
As at 31 March 2016 - 53.2 90.6 - 143.8
Effect of foreign exchange rate changes - 0.4 2.7 - 3.1
Charge for the year - 8.4 21.8 - 30.2
Disposals - - (6.6) - (6.6)
Net impairment charge on assets - 18.6 14.4 - 33.0
As at 31 March 2017 - 80.6 122.9 - 203.5
Net book value
As at 31 March 2017 99.6 8.2 42.0 20.3 170.1
As at 31 March 2016 88.8 34.7 43.1 23.0 189.6
1 During the year ended 31 March 2017, software assets of £14.4m were
impaired, of which £7.3m related to the transfer of the Beauty operations and
is included in adjusting items (see note 7).
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 presented within the intangible asset
category 'trade mark, licences and other intangible assets', and was being
amortised on a straight-line basis over the period 1 April 2013 to 31 December
2017. The carrying value of this asset was £26.1m at 31 March 2016. At 30
September 2016 an impairment charge of £18.6m was recorded to write the
carrying value of this intangible asset down to nil. Refer to note 7 for
further details.
Notes to the Financial Statements
12. Intangible assets (continued)
Impairment testing of goodwill
The carrying value of the goodwill allocated to cash generating units:
As at As at
31 March 31 March
2017 2016
£m £m
China1 48.9 45.4
Korea 29.4 25.1
Other 21.3 18.3
Total 99.6 88.8
1 The goodwill reported for China does not include any goodwill
attributable to the non-controlling interest.
The Group tests goodwill for impairment annually or where there is an
indication that goodwill might be impaired. The recoverable amount of all cash
generating units has been determined on a value-in-use basis. Value-in-use
calculations for each cash generating unit are based on projected three-year
pre-tax discounted cash flows together with a discounted terminal value. The
cash flows have been discounted at pre-tax rates reflecting the Group's
weighted average cost of capital adjusted for country-specific tax rates and
risks. Where the cash generating unit has a non-controlling interest which was
recognised at a value equal to its proportionate interest in the net
identifiable assets of the acquired subsidiary at the acquisition date, the
carrying amount of the goodwill has been grossed up, to include the goodwill
attributable to the non-controlling interest, for the purpose of impairment
testing the goodwill attributable to the cash generating unit. The key
assumptions contained in the value-in-use calculations include the future
revenues, the margins achieved, the assumed life of the business and the
discount rates applied.
The value-in-use calculations have been prepared using management's approved
financial plans for the three years ending 31 March 2020. These plans contain
management's best view of the expected performance for the year ending 31
March 2018 and the expected growth rates for the two years ending 31 March
2019 and 31 March 2020. The plans are based on the performance achieved in the
current year and management's knowledge of the market environment and future
business plans. A terminal value has been included in the value-in-use
calculation based on the cash flows for the year ending 31 March 2020
incorporating the assumption that there is no growth beyond 31 March 2020.
For the material goodwill balances of China and Korea, a sensitivity analysis
has been performed on the value-in-use calculations by assuming no growth
beyond the year ending 31 March 2018. This sensitivity analysis indicated
significant headroom between the recoverable amount under this scenario and
the carrying value of goodwill and therefore management considered no further
detailed sensitivity analysis was required.
The pre-tax discount rates for China and Korea were 16.7% and 14.0%
respectively (2016: 16.1%; 13.6%).
The other goodwill balance of £21.3m (2016: £18.3m) consists of amounts
relating to eight cash generating units, none of which have goodwill balances
exceeding £10m as at 31 March 2017.
No impairment has been recognised in respect of the carrying value of the
goodwill balance in the year as, for each cash generating unit, the
recoverable amount of goodwill exceeds its carrying value.
Notes to the Financial Statements
13. Property, plant and equipment
Cost Freehold land and buildings Leasehold improvements Fixtures,fittings andequipment1£m Assets in the course of construction Total
£m £m £m £m
As at 31 March 2015 137.5 361.5 443.5 27.8 970.3
Effect of foreign exchange rate changes 6.2 11.7 15.3 (0.5) 32.7
Additions 15.3 49.5 41.7 8.5 115.0
Disposals - (12.6) (26.7) (0.5) (39.8)
Reclassification from assets in the course - 8.2 17.7 (25.9) -
of construction
As at 31 March 2016 159.0 418.3 491.5 9.4 1,078.2
Effect of foreign exchange rate changes 18.4 47.5 43.7 1.0 110.6
Additions 0.4 37.4 27.0 13.2 78.0
Disposals (29.2) (32.4) (28.5) (0.4) (90.5)
Reclassification from assets in the course - 4.0 4.7 (8.7) -
of construction
As at 31 March 2017 148.6 474.8 538.4 14.5 1,176.3
Accumulated depreciation and impairment
As at 31 March 2015 48.2 181.3 304.3 - 533.8
Effect of foreign exchange rate changes 2.8 4.9 10.7 - 18.4
Charge for the year 3.3 45.9 62.7 - 111.9
Disposals - (12.4) (26.2) - (38.6)
Net impairment charge on assets 2.3 13.7 10.5 - 26.5
As at 31 March 2016 56.6 233.4 362.0 - 652.0
Effect of foreign exchange rate changes 6.7 28.5 33.2 - 68.4
Charge for the year 4.3 52.3 64.7 - 121.3
Disposals (21.3) (32.0) (27.6) - (80.9)
Net impairment charge on assets 0.6 8.1 7.2 - 15.9
As at 31 March 2017 46.9 290.3 439.5 - 776.7
Net book value
As at 31 March 2017 101.7 184.5 98.9 14.5 399.6
As at 31 March 2016 102.4 184.9 129.5 9.4 426.2
1 Included in fixtures, fittings and equipment are finance lease assets
with a net book value of £1.3m (2016: £1.7m).
During the year to 31 March 2017, a net impairment charge of £23.0m (2016:
£45.3m) was recorded as a result of the annual review of impairment of retail
store assets. A charge of £15.3m (2016: £24.2m) was recognised against
property, plant and equipment, and £7.7m (2016: £21.1m) was charged in
relation to onerous lease provisions. Refer to note 18 for further details of
onerous lease provisions.
Where indicators of impairment were identified, the impairment review compared
the value-in-use of the cash generating units to the carrying values at 31
March 2017. The pre-tax cash flow projections were based on financial plans of
expected revenues and costs for each retail cash generating unit, as 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
21.6% (2016: between 11.4% and 19.7%), based on the Group's weighted average
cost of capital adjusted for country-specific tax rates and risks. Where the
value-in-use was less than the carrying value of the cash generating unit, an
impairment of property, plant and equipment was recorded. 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 Financial Statements
13. Property, plant and equipment (continued)
Management has considered the potential impact of changes in assumptions on
the total recorded as a result of the review for impairment of retail store
assets and consideration of onerous lease provisions. The most significant
estimate is the future level of revenues achieved by the retail stores. It is
estimated that, for the stores subject to an impairment or onerous lease
provision in the year, a 5% decrease/increase in revenue assumptions for the
year ending 31 March 2018, with no change to subsequent forecast revenue
growth rate assumptions, would result in an £8m increase/£9m decrease in the
charge in the year ended 31 March 2017.
The impairment charge recorded in property, plant and equipment relates to 33
retail cash generating units (2016: 32 retail cash generating units) for which
the total recoverable amount at the balance sheet date is £22.0m (2016:
£18.2m). Impairment charges of £0.6m (2016: £2.3m) arose relating to other
assets in the year.
14. Trade and other receivables
As at As at
31 March 31 March
2017 2016
£m £m
Non-current
Deposits and other financial receivables 44.9 37.5
Other non-financial receivables 3.7 2.8
Prepayments 27.8 26.2
Total non-current trade and other receivables 76.4 66.5
Current
Trade receivables 201.3 205.1
Provision for doubtful debts (9.5) (7.2)
Net trade receivables 191.8 197.9
Other financial receivables 22.3 20.9
Other non-financial receivables 20.4 27.5
Prepayments 38.1 35.4
Accrued income 3.0 3.7
Total current trade and other receivables 275.6 285.4
Total trade and other receivables 352.0 351.9
Included in total trade and other receivables are non-financial assets of
£90.0m (2016: £91.9m).
The individually impaired receivables relate to balances with trading parties
which have passed their payment due dates or where uncertainty exists over
recoverability. As at 31 March 2017, trade receivables of £17.2m (2016:
£18.2m) were impaired. The amount of the provision against these receivables
was £9.5m as at 31 March 2017 (2016: £7.2m). It was assessed that a portion of
the receivables is expected to be recovered. The ageing of the impaired trade
receivables is as follows:
As at As at
31 March 31 March
2017 2016
£m £m
Current - 3.7
Less than 1 month overdue 7.0 11.5
1 to 3 months overdue 2.3 1.5
Over 3 months overdue 7.9 1.5
17.2 18.2
Notes to the Financial Statements
14. Trade and other receivables (continued)
As at 31 March 2017, trade receivables of £20.9m (2016: £9.3m) were overdue
but not impaired. The ageing of these overdue receivables is as follows:
As at As at
31 March 31 March
2017 2016
£m £m
Less than 1 month overdue 8.4 4.3
1 to 3 months overdue 12.1 4.1
Over 3 months overdue 0.4 0.9
20.9 9.3
Movement in the provision for doubtful debts is as follows:
Year to Year to
31 March 31 March
2017 2016
£m £m
As at 1 April 7.2 4.6
Effect of foreign exchange rate changes 0.2 -
Increase in provision for doubtful debts 2.4 3.1
Receivables written off during the year as uncollectable (0.3) (0.5)
As at 31 March 9.5 7.2
As at 31 March 2017 there were £1.6m impaired receivables within other
receivables (2016: £1.5m).
The carrying amounts of the Group's non-derivative financial assets excluding
cash and cash equivalents by customer geographical location are:
Year to Year to
31 March 31 March
2017 2016
£m £m
Asia Pacific 120.4 99.3
EMEIA 78.1 89.1
Americas 63.5 71.6
262.0 260.0
15. Inventories
As at As at
31 March 31 March
2017 2016
£m £m
Raw materials 32.7 38.3
Work in progress 1.8 1.3
Finished goods 470.8
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