REG - Burberry Group PLC - Preliminary Results <Origin Href="QuoteRef">BRBY.L</Origin> - Part 3
18/05/2017 07:06
- Part 3: For the preceding part double click ID:nRSR4813Fb
447.1
Total inventories 505.3 486.7
The cost of inventories recognised as an expense and included in cost of sales
amounted to £795.9m (2016: £723.3m).
The net movement in inventory provisions included in cost of sales for the
year ended 31 March 2017 was a cost of £21.1m
(2016: £24.9m).
The cost of finished goods physically destroyed in the year was £26.9m (2016:
£18.8m).
16. Cash and cash equivalents
As at As at
31 March 31 March
2017 2016
£m £m
Cash at bank and in hand 268.7 282.1
Short-term deposits 574.8 429.7
Total 843.5 711.8
Notes to the Financial Statements
17. Trade and other payables
As at As at
31 March 31 March
2017 2016
£m £m
Non-current
Put option liability over non-controlling interest - 45.8
Other payables 2.5 3.0
Deferred income and non-financial accruals 75.6 65.9
Deferred consideration 23.8 -
Total non-current trade and other payables 101.9 114.7
Current
Trade payables 172.3 167.2
Other taxes and social security costs 58.7 58.3
Other payables1 8.2 3.9
Accruals 186.9 132.4
Deferred income and non-financial accruals 22.1 25.4
Deferred consideration 10.9 -
Total current trade and other payables 459.1 387.2
Total trade and other payables 561.0 501.9
1 Includes £3.3m (2016: £nil) relating to the cost of shares not yet
purchased under an agreement entered in to by the Company to purchase its own
shares, together with anticipated stamp duty arising. Refer to note 20 for
further details.
Included in total trade and other payables are non-financial liabilities of
£156.5m (2016: £149.6m).
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, retained 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 liability 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.
The value of the put option liability is £nil at 31 March 2017 (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 7, together
with an increase due to the 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 23 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 23 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 the fixed payments
has been derived via a present value calculation of the remaining fixed
payments of AED 38.1m (£8.3m) 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 has been estimated using a present value calculation, incorporating
observable and non-observable inputs. 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 the
current period 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 these
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 LLC and its subsidiaries would result in a £2.3m increase/decrease in the
carrying value of the deferred consideration relating to contingent payments
at 31 March 2017 and a corresponding £2.3m decrease/increase in the profit
before taxation for the year ended 31 March 2017.
Notes to the Financial Statements
18. Provisions for other liabilities and charges
Property obligations Restructuring costs Other Total
£m £m costs £m
£m
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
Effect of foreign exchange rate changes 6.2 - 0.1 6.3
Created during the year 18.8 - 6.9 25.7
Discount unwind 0.1 - - 0.1
Utilised during the year (11.1) - (1.0) (12.1)
Released during the year (8.1) - (2.5) (10.6)
Balance as at 31 March 2017 57.7 - 7.7 65.4
Within property obligations are amounts of £30.3m (2016: £27.0m) 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 £7.9m (2016:
£20.1m). This includes amounts of £7.7m (2016: £21.1m) relating to retail
stores (refer to note 13) and a charge of £0.2m (2016: credit of £1.0m)
relating to other properties.
As at As at
31 March 31 March
2017 2016
£m £m
Analysis of total provisions:
Non-current 47.3 38.4
Current 18.1 17.6
Total 65.4 56.0
The non-current provisions relate to provisions for onerous leases and
property reinstatement costs which are expected to be utilised within 19 years
(2016: 20 years).
19. Bank overdrafts and borrowings
Included within bank overdrafts is £31.3m (2016: £44.9m) representing balances
on cash pooling arrangements in the Group.
The Group has a number of committed and uncommitted arrangements agreed with
third-parties. At 31 March 2017, the Group held bank overdrafts of £3.0m
(2016: £6.6m) 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 banks. At 31 March 2017, there were £nil
outstanding drawings (2016: £nil). During the year the Group exercised an
option to extend the maturity of the facility to November 2021, after
receiving consent from all members 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 Statements
20. Share capital and reserves
Allotted, called up and fully paid share capital Number £m
Ordinary shares of 0.05p (2016: 0.05p) each
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
Allotted on exercise of options during the year 135,811 -
As at 31 March 2017 445,173,065 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 ended 31 March 2017, the Company entered into an agreement to
purchase £100m of its own shares back 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
ESOP trusts are offset against retained earnings, as the amounts paid reduce
the profits available for distribution by the Company.
As at 31 March 2017 the amount held as treasury shares by the Company and
offset against retained earnings is £97.2m (2016: £nil) including stamp duty
of £0.5m (2016: £nil). As at 31 March 2017 the Company held 6.7m treasury
shares (2016: nil), with a market value of £116.1m (2016: £nil). £3.3m (2016:
£nil), relating to the cost of shares not yet purchased under the current
share buy-back agreement, has been charged to retained earnings in the period,
with the payment obligation recognised in other payables (note 17).
As at 31 March 2017 the amount of own shares held by ESOP trusts and offset
against retained earnings is £44.7m 2016: £39.9m). As at 31 March 2017, the
ESOP trusts held 3.5m shares (2016: 3.1m) in the Company, with a market value
of £59.6m (2016: £42.7m). In the year to 31 March 2017 the ESOP trusts have
waived their entitlement to dividends of £1.7m (2016: £1.2m).
During the year profits of £nil (2016: £2.0m) have been transferred to capital
reserves due to statutory requirements of subsidiaries. In the year ended 31
March 2016, £6.2m was transferred from capital reserves to retained earnings
due to the disposal and merger of subsidiaries. No such activity took place in
the current year. 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 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
Other comprehensive income:
Cash flow hedges - gains deferred in equity - 8.7 - - 8.7
Cash flow hedges - gains transferred to income - (4.0) - - (4.0)
Net investment hedges - losses deferred in equity - - (2.3) - (2.3)
Foreign currency translation differences - - - 101.3 101.3
Tax on other comprehensive income - (1.0) 0.5 (5.4) (5.9)
Total comprehensive income for the year - 3.7 (1.8) 95.9 97.8
Balance as at 31 March 2017 41.1 7.9 2.1 260.8 311.9
Notes to the Financial Statements
21. Capital commitments
As at As at
31 March 31 March
2017 2016
£m £m
Capital commitments contracted but not provided for:
Property, plant and equipment 13.2 15.2
Intangible assets 3.2 1.6
Total 16.4 16.8
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
2017 2016
£m £m
Salaries, short-term benefits and social security costs 14.3 9.1
Termination benefits 1.6 -
Post-employment benefits - 0.1
Share based compensation (all awards and options settled in shares) 5.5 0.5
Total 21.4 9.7
There were no other material related party transactions in the period.
23. Transactions with non-controlling interests
During the year ended 31 March 2017, the Group entered into two transactions
with non-controlling interests. The impact of these transactions has been
presented in the financial statements of the Group in the following manner:
Burberry Middle East Burberry Shanghai Total
transaction transaction £m
£m £m £m
Charge taken through statement of changes in equity 44.6 53.7 98.3
Cash outflow recognised in statement of cash flows (15.1) (53.7) (68.8)
A liability in relation to the remaining deferred consideration to be paid on
the Burberry Middle East transaction has also been recognised. Refer to note
17 for further details on the carrying value of the liability at 31 March
2017.
Notes to the Financial Statements
23. Transactions with non-controlling interests (continued)
Burberry Middle East LLC
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 for 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.
In the judgement of management, the fixed payments of AED 120.0m are most
appropriately treated as part of the consideration for purchasing the
non-controlling interest in Burberry Middle East LLC. Therefore the
transaction has been accounted for as a purchase of the non-controlling
interest in Burberry Middle East LLC and its subsidiaries by the Group, for
fixed and contingent deferred consideration, with the exception of a 12%
interest in Burberry Qatar WLL which will continue to be held by another
minority shareholder.
The present value of the fixed and contingent deferred consideration in total,
at the date of the transaction, was estimated to be AED 236.0m (£44.6m).
Non-controlling interests with a book value of £25.5m were transferred to
retained earnings. Deferred consideration of AED 80.7m (£15.1m) was
subsequently settled in the period.
Burberry (Shanghai) Trading Co., Ltd
On 1 August 2016, the Group acquired the remaining 15% economic interest in
its business in China, which was held by Sparkle Roll Holdings Ltd, a
non-Group company, for consideration of CNY 470.9m (£53.7m), through the
exercise of a call option held by the Group. The transaction has been
accounted for as a purchase of the 15% non-controlling interest in Burberry
(Shanghai) Trading Co., Ltd, for consideration of £53.7m. Non-controlling
interests with a book value of £27.7m were transferred to retained earnings.
The Group had also granted a put option over the same 15% economic interest to
Sparkle Retail Holdings Ltd which was exercisable after 1 September 2020. The
net present value of the expected put option payment was held as a non-current
financial liability. Upon exercise of the call option by the Group, the put
option expired and as a result, the value of the liability at the date of
exercise, being £51.0m, was transferred directly to retained earnings.
24. Contingent liabilities
In a number of jurisdictions the Group is subject to claims against it and to
tax audits. These typically relate to Value Added Taxes, sales taxes, customs
duties, corporate taxes, transfer pricing, payroll taxes, various contractual
claims and other matters. During the year, the Group reached a resolution of
its dispute with the Spanish tax authorities regarding the tax treatment of
interest paid during the year ended 31 March 2005. 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.
25. Events after the balance sheet date
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. Under this agreement,
Coty will make an upfront payment to Burberry of £130m for the licence and
related transfer of the Beauty operations. Coty will also pay Burberry for
assets transferring, principally inventory, estimated to be approximately £50m
subject to any completion adjustments. Burberry will receive further payments,
relating to royalties, over the term of the licence.
This agreement is expected to complete in October 2017. Burberry will receive
the above sums on completion of the transaction. Associated costs will be
incurred, currently estimated to be £30m. The licence agreement and the
business transfer will be accounted for in the financial statements for the
year ending 31 March 2018. Some of the costs arising in relation to the
transaction have been incurred and recognised in the current period (refer to
note 7).
This information is provided by RNS
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