REG - Burberry Group PLC - Preliminary Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 3
18/05/2016 07:06
- Part 3: For the preceding part double click ID:nRSR5323Yb
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
Net book value
As at 31 March 2016 102.4 184.9 129.5 9.4 426.2
As at 31 March 2015 89.3 180.2 139.2 27.8 436.5
1 Included in fixtures, fittings and equipment are finance lease assets
with a net book value of £1.7m (2015: £2.3m).
2 During the year ended 31 March 2015, £20.6m of assets were reclassified
from leasehold improvements to freehold land and buildings as this was more
representative of the nature of the assets.
During the year to 31 March 2016, a net impairment charge of £45.3m (2015:
£10.8m) was recorded as a result of the annual review of impairment of retail
store assets. A charge of £24.2m (2015: £3.9m) was recognised against
property, plant and equipment, £nil (2015: £0.2m) was charged against
intangible assets and £21.1m (2015: £6.7m) was charged in relation to onerous
lease provisions. Refer to note 12 and note 18 for further details of
intangible assets and onerous lease provisions respectively.
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 2016. The pre-tax cash flow projections were based on financial plans of
expected revenues and costs of 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
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 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 information
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 2017, with no change to subsequent forecast revenue
growth rate assumptions, would result in a £7m increase/£6m decrease in the
charge in the year ended 31 March 2016.
The impairment charge recorded in property, plant and equipment relates to 32
retail cash generating units (2015: 22 retail cash generating units) for which
the total recoverable amount at the balance sheet date is £18.2m (2015:
£6.5m). Impairment charges of £2.3m (2015: £nil) arose relating to other
assets in the year.
14. Trade and other receivables
As at As at
31 March 31 March
2016 2015
£m £m
Non-current
Deposits and other financial receivables 37.5 39.6
Other non-financial receivables 2.8 2.7
Prepayments 26.2 18.2
Total non-current trade and other receivables 66.5 60.5
Current
Trade receivables 205.1 193.6
Provision for doubtful debts (7.2) (4.6)
Net trade receivables 197.9 189.0
Other financial receivables 20.9 16.3
Other non-financial receivables 27.5 23.9
Prepayments 35.4 28.1
Accrued income 3.7 3.0
Total current trade and other receivables 285.4 260.3
Total trade and other receivables 351.9 320.8
Included in total trade and other receivables are non-financial assets of
£91.9m (2015: £72.9m).
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 2016, trade receivables of £18.2m (2015:
£13.6m) were impaired. The amount of the provision against these receivables
was £7.2m as at 31 March 2016 (2015: £4.6m). 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
2016 2015
£m £m
Current 3.7 0.1
Less than one month overdue 11.5 8.8
One to three months overdue 1.5 1.5
Over three months overdue 1.5 3.2
18.2 13.6
Notes to the financial information
14. Trade and other receivables (continued)
As at 31 March 2016, trade receivables of £9.3m (2015: £7.5m) were overdue but
not impaired. The ageing of these overdue receivables is as follows:
As at As at
31 March 31 March
2016 2015
£m £m
Less than one month overdue 4.3 4.5
One to three months overdue 4.1 2.3
Over three months overdue 0.9 0.7
9.3 7.5
Movement in the provision for doubtful debts is as follows:
Year to Year to
31 March 31 March
2016 2015
£m £m
As at 1 April 4.6 5.3
Increase in provision for doubtful debts 3.1 0.1
Receivables written off during the year as uncollectable (0.5) (0.8)
As at 31 March 7.2 4.6
As at 31 March 2016 there were £1.5m impaired receivables within other
receivables (2015: £nil).
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
2016 2015
£m £m
Asia Pacific 99.3 105.0
EMEIA 89.1 78.2
Americas 71.6 64.7
260.0 247.9
15. Inventories
As at As at
31 March 31 March
2016 2015
£m £m
Raw materials 38.3 29.2
Work in progress 1.3 2.2
Finished goods 447.1 405.2
Total inventories 486.7 436.6
The cost of inventories recognised as an expense and included in cost of sales
amounted to £723.3m (2015: £730.1m).
The net movement in inventory provisions included in cost of sales for the
year ended 31 March 2016 was a cost of £24.9m (2015: £31.3m).
The cost of finished goods physically destroyed in the year is £18.8m (2015:
£19.7m).
16. Cash and cash equivalents
As at As at
31 March 31 March
2016 2015
£m £m
Cash at bank and in hand 282.1 252.3
Short-term deposits 429.7 365.1
Total 711.8 617.4
Notes to the financial information
17. Trade and other payables
As at As at
31 March 31 March2015£m
2016
£m
Non-current
Put option liability over non-controlling interest 45.8 54.4
Other payables 3.0 3.7
Deferred income and non-financial accruals 65.9 59.0
Total non-current trade and other payables 114.7 117.1
Current
Trade payables 167.2 159.8
Other taxes and social security costs 58.3 61.0
Other payables 3.9 4.5
Accruals 132.4 164.0
Deferred income and non-financial accruals 25.4 16.7
Total current trade and other payables 387.2 406.0
Total trade and other payables 501.9 523.1
Included in total trade and other payables are non-financial liabilities of
£149.6m (2015: £136.7m).
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. The call option is currently exercisable and the put
option is exercisable after 1 September 2020. The net present value of the put
option liability has been recognised as a non-current financial liability
under IAS 39. The present value of any payment under the call option before 1
September 2020 would be different should Burberry decide to exercise the call
option due to the difference between estimated risk adjusted discount rates
and estimated growth in business performance in China over the period to 1
September 2020.
The value of the put option liability is £45.8m at 31 March 2016 (2015:
£54.4m). The movement in the liability for the period includes a decrease of
£9.9m relating to unrealised fair value movements, as described in note 7,
offset by the impact of translation of the put option liability to the Group's
presentational currency.
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 £4.6m
increase/decrease in the carrying value of the put option liability at 31
March 2016 (2015: £5.4m), and a corresponding £4.6m loss/gain in the profit
before taxation for the year ended 31 March 2016 (2015: £5.4m).
A 1% increase/decrease in the risk adjusted discount rate for China would
result in a £2.0m decrease/£2.1m increase in the carrying value of the put
option liability at 31 March 2016 (2015: £2.9m decrease/£3.0m increase), and a
corresponding £2.0m gain/£2.1m loss in the profit before taxation for the year
ended 31 March 2016 (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 31 March 2016 is £79.7m
(2015: £109.0m).
Notes to the financial information
18. Provisions for other liabilities and charges
Property obligations Restructuring costs Other Total
£m £m costs £m
£m
Balance as at 31 March 2014 22.9 1.5 2.2 26.6
Effect of foreign exchange rate changes 0.7 (0.1) (0.1) 0.5
Created during the year 12.3 - 0.6 12.9
Discount unwind 0.2 - - 0.2
Utilised during the year (5.4) (0.6) (0.2) (6.2)
Released during the year (1.3) - (0.2) (1.5)
Balance as at 31 March 2015 29.4 0.8 2.3 32.5
Effect of foreign exchange rate changes 1.0 - 0.1 1.1
Created during the year 30.8 - 2.2 33.0
Discount unwind 0.1 - - 0.1
Utilised during the year (5.8) (0.1) (0.2) (6.1)
Released during the year (3.7) (0.7) (0.2) (4.6)
Balance as at 31 March 2016 51.8 - 4.2 56.0
Within property obligations are amounts of £27.0m (2015: £12.1m) relating to
onerous lease obligations. See note 13 for details relating to impairment of
assets and onerous lease provisions for retail cash generating units.
The net charge in the year for onerous lease obligations is £20.1m (2015:
£6.5m). This includes amounts of £21.1m (2015: £6.7m) relating to retail
stores (refer to note 13) and a credit of £1.0m (2015: £0.2m) relating to
other properties.
As at As at
31 March 31 March
2016 2015
£m £m
Analysis of total provisions:
Non-current 38.4 22.2
Current 17.6 10.3
Total 56.0 32.5
The non-current provisions relate to provisions for onerous leases and
property reinstatement costs which are expected to be utilised within 20 years
(2015: 21 years).
19. Bank overdrafts and borrowings
Included within bank overdrafts is £44.9m (2015: £60.9m) representing balances
on cash pooling arrangements in the Group.
The Group has a number of uncommitted overdraft and borrowing facilities
agreed with third-party banks. At 31 March 2016, the Group held bank
overdrafts of £6.6m (2015: £4.3m) excluding balances on cash pooling
arrangements.
On 25 November 2014, the Group entered into 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 31 March 2016,
there were £nil outstanding drawings (2015: £nil). During the year the Group
exercised an option to extend the maturity of the facility to November 2020,
after receiving consent from all members of the syndicate. The agreement
contains another option, exercisable in 2016, which allows the Group to extend
for an additional one year, at the consent of the syndicate. The Group is in
compliance with the financial and other covenants within this facility and has
been in compliance throughout the financial year.
The fair value of borrowings and overdrafts approximate the carrying amount
because of the short maturity of these instruments.
Notes to the financial information
20. Share capital and reserves
Allotted, called up and fully paid share capital Number £m
Ordinary shares of 0.05p (2015: 0.05p) each
As at 31 March 2014 443,642,290 0.2
Allotted on exercise of options during the year 1,101,777 -
As at 31 March 2015 444,744,067 0.2
Allotted on exercise of options during the year 293,187 -
As at 31 March 2016 445,037,254 0.2
The Company has a general authority from shareholders, renewed at each Annual
General Meeting, to repurchase a maximum of 10% of its issued share capital.
During the year to 31 March 2016, no ordinary shares were repurchased by the
Company under this authority (2015: nil).
The cost of purchasing 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 31 March 2016 the amounts offset against
this reserve are £39.9m (2015: £57.0m). As at 31 March 2016, the ESOP trusts
held 3.1m shares (2015: 4.1m) in the Company, with a market value of £42.7m
(2015: £71.9m). In the year to 31 March 2016 the ESOP trusts have waived their
entitlement to dividends of £1.2m (2015: £1.2m).
During the year profits of £2.0m (2015: £5.3m) have been transferred to
capital reserves due to statutory requirements of subsidiaries. Due to the
disposal and merger of subsidiaries, £6.2m (2015: £nil) has been transferred
from capital reserves to retained earnings. The capital reserve consists of
non-distributable reserves and the capital redemption reserve arising on the
purchase of own shares.
Other Reserves in the statement of changes in equity consists of the capital
reserve, the foreign currency translation reserve, and the hedging reserves.
The hedging reserves consist of the cash flow hedge reserve and the net
investment hedge reserve.
Capital Hedging reserves Foreign currency translation Total
reserve reserve £m
£m £m
Cash flow hedges Net investment hedge
£m £m
Balance as at 31 March 2014 40.0 1.5 4.1 104.7 150.3
Other comprehensive income:
Cash flow hedges - losses deferred in equity - (6.1) - - (6.1)
Cash flow hedges - gains transferred to income - (1.3) - - (1.3)
Foreign currency translation differences - - - 46.5 46.5
Tax on other comprehensive income - 1.5 - (4.4) (2.9)
Total comprehensive (expense)/income for the year - (5.9) - 42.1 36.2
Transfer between reserves 5.3 - - 0.5 5.8
Balance as at 31 March 2015 45.3 (4.4) 4.1 147.3 192.3
Other comprehensive income:
Cash flow hedges - gains deferred in equity - 7.3 - - 7.3
Cash flow hedges - losses transferred to income - 3.5 - - 3.5
Net investment hedges - losses deferred in equity - - (0.8) - (0.8)
Foreign currency translation differences - - - 19.5 19.5
Tax on other comprehensive income - (2.2) 0.6 (1.9) (3.5)
Total comprehensive income/(expense) for the year - 8.6 (0.2) 17.6 26.0
Disposal of subsidiaries (6.2) - - - (6.2)
Transfer between reserves 2.0 - - - 2.0
Balance as at 31 March 2016 41.1 4.2 3.9 164.9 214.1
Notes to the financial information
21. Capital commitments
As at As at
31 March 31 March
2016 2015
£m £m
Capital commitments contracted but not provided for:
Property, plant and equipment 15.2 36.3
Intangible assets 1.6 1.0
Total 16.8 37.3
Contracted capital commitments represent contracts entered into by the year
end and future work in respect of major capital expenditure projects where
activity has commenced by the year end relating to property, plant and
equipment and intangible assets.
22. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not
disclosed in this note. Total compensation in respect of key management, who
are defined as the Board of Directors and certain members of senior
management, is considered to be a related party transaction.
The total compensation in respect of key management for the year was as
follows:
Year to Year to
31 March 31 March
2016 2015
£m £m
Salaries, short-term benefits and social security costs 9.1 17.6
Post-employment benefits 0.1 0.1
Share based compensation (all awards and options settled in shares) 0.5 9.5
Total 9.7 27.2
There were no other material related party transactions in the period.
23. Contingent liabilities
In a number of jurisdictions the Group is subject to claims against it and to
tax audits. These typically relate to valued added taxes, sales taxes, customs
duties, corporate taxes, transfer pricing, payroll taxes, various contractual
claims and other matters. 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
This information is provided by RNS
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