REG - Mulberry Group PLC - Half Year Results
30/11/2022 07:00
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RNS Number : 9926H Mulberry Group PLC 30 November 2022
Mulberry Group plc
Results for the twenty-six weeks ended 1 October 2022
Investing for future growth
Mulberry Group plc (the "Group" or "Mulberry"), the British sustainable luxury
brand, announces unaudited results for the twenty-six weeks ended 1 October
2022 (the "period").
THIERRY ANDRETTA, CHIEF EXECUTIVE OFFICER, COMMENTED:
"We have delivered a resilient performance across the Group, supported by
strong international demand and continued investment in the UK.
Mulberry has a distinct brand identity, combining British heritage with
innovative products and modern craft. What helps set us apart is our
commitment to sustainability, as articulated in our ambitious Made to Last
manifesto, in which we announced our intention to become Net Zero by 2035.
This manifesto frames many of the strategic and operational decisions we make
- from our commitment to source 100% of our leather from environmentally
accredited tanneries, to the focus we give to circularity for our Pre-Loved
bags programme. Most important is our Lifetime Service Centre in our Somerset
factory where customers can get their beautiful bags and leather goods
repaired and rejuvenated alongside the new designs and new collections.
Looking ahead, we are confident in our ability to execute our strategy and to
continue to invest across the Group for our future growth, in spite of the
challenging economic and geopolitical backdrop. We are well placed for the
festive trading period and will continue to drive the business forward to the
benefit of all stakeholders."
Financial Highlights
· Group revenue during the period down 1% to £64.9m (2021:
£65.7m)
o UK retail sales were impacted by the broader economic environment, down
10% to £34.1m (2021: £38.0m)
o China retail sales increased 6%, despite COVID-19 restrictions, which
contributed to the 1% increase in Asia Pacific retail sales to £11.9m (2021:
£11.8m)
o International retail sales remained in line with the same period last year
at £17.5m (2021: £17.6m)
· Gross margin of 71% (2021: 69%) achieved due to a continued
strategic focus on full-price sales and increased volume efficiencies
· Loss before tax excluding adjusting items for the period of £2.8m
(2021: profit before tax excluding adjusting items £4.5m)(1) (#_ftn1)
reflecting additional investment in the Group
· Reported loss before tax of £3.8m (2021: profit before tax
£10.2m which included business rates relief of £2.0m and a one-off profit on
disposal of Paris lease of £5.7m)
Operating Highlights
· In September 2022, launched Mulberry Sweden with the acquisition
of three stores previously operated by our Swedish franchisee
· Digital sales accounted for 25% of total Group revenue in the
period (2021: 29%), as UK customers continued to return to a physical shopping
experience
· International growth supported by new stores in China and a store
and the launch of digital platforms in South Korea
· Product innovation continued in the period with the launch of the
Softie bag family in new colours and shapes continuing to attract a broad
range of customers
· Established a transformation function to support the delivery of
our strategy, including projects and systems that will underpin our wider
business omni-channel growth in the longer term
Sustainability Highlights
· Recognised as the "Sustainable Luxury Brand of The Year" at the
Walpole British Luxury Awards in November 2022 for the progress we have made
towards our Made to Last manifesto, showcasing our ongoing commitment to
transform the business to a regenerative and circular model, encompassing the
entire supply chain by 2030, and to become Net Zero by 2035
· Proud to announce that 100% of leather (including suede and nappa
linings) for Bags, Mini Bags and Small Leather Goods is sourced from tanneries
with an environmental accreditation. We also maintain our commitment to
offsetting the carbon emissions related to leather purchases
· Mulberry Pre-Loved, our buy back and resale programme, generated
retail sales 35% above last year
· Lifetime Service Centre at The Rookery continues to restore more
than 10,000 bags a year
· Re-launched our ready-to-wear category with Softie inspired
outerwear, using recycled nylon outer and recycled silk padding
· Continued to focus on embedding sustainability and circularity
across the entire business, which now includes a partnership with Hurr from
June 2022, a circular rental marketplace
Current Trading
· An improved trend in retail revenue for the eight weeks to 26
November 2022 compared to the same period last year, however there remains
ongoing uncertainty in the economic and geopolitical environment
· Gross margin in the second half is expected to be maintained at
first half levels
· Further development in the UK, and on 14 October 2022 opened a
new store at the iconic Battersea Power Station development
· Continued focus on building our direct-to-customer model with the
acquisition of five stores in Australia
· Well prepared for the important festive trading season and the
usual second half weighting to trading
· Mulberry has a clear customer proposition and plan for growth,
and we are confident in our ability to execute this strategy to the benefit of
all our stakeholders
FOR FURTHER DETAILS PLEASE CONTACT:
Mulberry
Charles
Anderson
Tel: +44 (0) 20 7605 6793
Headland (Public Relations)
Lucy Legh / Joanna clark
Tel: +44 (0) 20
3805 4822
mulberry@headlandconsultancy.com
HOULIHAN LOKEY UK LIMITED (FINANCIAL ADVISER AND NOMAD)
Tim Richardson
Tel: +44 (0) 20 7484 4040
Notes
(1) See note 2 on pages 15 and 16 for more details of alternative performance
measures and one off costs
OVERVIEW
Despite a backdrop of macro-economic uncertainty during the period, we
continued to build Mulberry as a sustainable global luxury brand, making good
progress across each of our four strategic pillars: omni-channel distribution;
international development; constant innovation; and sustainable lifecycle. I
would like to thank all of my colleagues for their continuing focus, hard work
and commitment.
We continue to optimise our digital channels and global store network, and
build brand awareness, with a particular focus on Asia Pacific. As previously
flagged, we progressively increased our marketing expenditure during the
period and invested in projects to improve the Group's legacy systems and
develop the next generation of digital and omni-channel platforms, including
cloud-based Software as a Solution (SaaS) implementation costs of £0.8m
(2021: nil). This investment will continue in the current year and beyond and
will underpin our wider business omni-channel growth for the longer term.
We opened stores in the region at Nanjing Deji, China, in April 2022, and a
pop-up in Gwang Ju, Korea, in May 2022. We also launched on new digital
platforms in Korea; Naver.com and GS.com. Further international developments
included the relocation of our flagship store in New York in April 2022, and
the refurbishment of our Amsterdam store in June 2022.
In line with our direct-to-customer model, we launched Mulberry Sweden in
September 2022, following the acquisition of three stores previously operated
by our Swedish franchisee, focusing on an omni-channel customer centric model.
Similarly, during the period we incurred £0.9m of costs in financially
supporting our Australian franchisee in preparation for acquiring these
Australian assets post the period end.
Our Made to Last manifesto continues to set us apart, and we are progressing
in our aim to reach zero carbon emissions by 2035. We continue to innovate in
materials and product, including our new Softie family, which launched in
February 2022. All the leather we source now comes from environmentally
accredited tanneries, and we are offsetting 100% of the carbon emissions
related to all leather purchases.
Group revenue decreased by 1% over the period but overall gross margin
increased to 71% (2021: 69%) supported by our strategic focus on full-price
sales and increased volume efficiencies. An underlying loss before tax for the
period of £2.8m (2021: profit before tax of £4.5m) reflects the additional
investments and costs highlighted above, as well as normalised business rates,
with COVID-19 related reliefs benefitting the prior period by £2.0m.
We ended the period with net cash of £6.5m (2021: £30.3m) and deferred
liabilities of nil (2021: £5.0m) and remain in a strong financial position
with which to continue to progress our strategic goals.
BOARD CHANGES
After 35 years with Mulberry, Godfrey Davis stepped down as Chairman of the
Board on 30 September 2022. Godfrey remains part of the Mulberry family having
taken up a new honorary, non-Board position. I would like to take this
opportunity to thank Godfrey for the outstanding contribution he has made to
the Group over 35 years as director, chief executive, and chairman.
Chris Roberts, a non-executive director of the Group for the past 20 years,
was appointed as Chairman of the Board with effect from 30 September 2022. A
search for an additional independent non-executive director is underway.
CURRENT TRADING AND OUTLOOK
Since the period ended we have opened a new store at the iconic Battersea
Power Station in London on 14 October and launched a duty free store in
Hainan, Greater China.
We have also finalised the acquisition of the assets previously owned and run
by our Australian franchisee, having provided financial support to the
business during the period. We will now operate directly as Mulberry Australia
through five Mulberry stores there.
The wider macro-economic environment continues to present some uncertainty, in
particular with regards inflationary pressures. As a business we are managing
inflationary challenges through various measures. We fixed our energy price in
October 2021 for a three-year period, which has helped mitigate the impact of
much of the current energy-price increase. We also introduced price increases
in March 2022 and September 2022 - as part of our global strategy - to ensure
we make no compromises on the quality of our product and our Made to Last
manifesto, and to help protect our margins.
We are focused on investing for our future growth despite the challenging
economic and geopolitical backdrop. We are confident in our ability to execute
our strategy and are well prepared for the important festive trading period.
PROGRESS AGAINST OUR STRATEGY
With a rich heritage in leather craftmanship and a reputation for innovation,
we aim to build Mulberry as the British sustainable global luxury brand
through four strategic growth pillars.
Strategic pillar 1 - Omni-channel distribution
Aiming to enhance our customers' experience, our single global approach to
inventory allows shoppers to use mulberry.com and our entire store network to
research, buy and return our products in the way that suits them. Our central
digital platform integrates seamlessly with our stores to offer this
convenient way of choosing our products.
Virtual and in-store appointments continue to play a vital role in the
customer journey, representing 10% of all UK store sales and resulting in an
increased average transaction value higher than the walk-in equivalent.
Digital sales represented 25% (2021: 29%) of Group revenue. In Asia Pacific,
digital sales grew to 23% (2021: 19%) of the region's sales, supported by
developing strategic partnerships, including Tmall in China and Naver in
Korea.
We had a store network of 103 points of sale across retail and franchise at
the period end. In the UK we operated 39 retail stores at the period end
(2021: 45), which included 15 John Lewis and 6 House of Fraser concessions. We
continue to manage the business proactively and focus on optimising the store
network.
As part of our wider strategic growth plans and omni-channel approach, we are
moving to full ownership model and reducing our franchised operations. This
allows us to increase our focus on the customer experience and grow the
percentage of our omni-channel business. During the period we acquired three
stores previously operated by our Swedish franchisee including a stand-alone
store in Malmo and concessions in NK department stores in Stockholm and
Gothenburg. Mulberry Sweden is now wholly owned and operated by the Group.
Strategic pillar 2 - International development
We are optimising our digital channels and global store network, and building
brand awareness, with a particular focus on Asia Pacific, which continues to
offer significant growth opportunities.
We saw a positive recovery in Asia Pacific, despite a number of COVID-19
restrictions still applying early in the period, with overall sales marginally
up on the same period last year. We also opened stores in the region at
Nanjing Deji, China, in April 2022, and a pop-up in Gwang Ju, Korea, in May
2022. On the digital side, we have launched on new platforms in Korea,
Naver.com and GS.com. Further international developments include the
relocation of our flagship store in New York in April 2022, and the
refurbishment of our Amsterdam store in June.
Strategic pillar 3 - Constant innovation
We continue to work with new materials, and methods of creation and
production, to adapt to changing customer tastes and to meet demand. At the
same time, we are adding new services and transforming our supply chain to be
agile to market trends, while reducing lead time to match the increase in
digital demand.
The half year under review was the first full period for our new Softie
family, which launched in February 2022, with new colours and shapes being
added throughout the period, targeting a much younger luxury customer. In
September 2022, we then diversified across categories with the launch of
Softie ready-to-wear products - eight outerwear garments with recycled nylon
and recycled silk padding, echoing the launch of the new Softie bag family. We
continued the expansion of the Softie line with a versatile clutch bag.
Following the strong trend for mini bags, particularly in Asia, another
strategic move this season was to reposition iconic families of bags through
the launch of micro bags. These bridge the gap between our small leather goods
and bags, and make our icons more affordable and potentially appealing to a
broad range of customers, while increasing brand awareness.
Strategic pillar 4 - Sustainable lifecycle
Our Made to Last manifesto sets us apart, and we extend the life of all our
products through our Lifetime Service Centre, buy back offer, and The Mulberry
Exchange for pre-loved bags. We aim for our business to be regenerative and
circular across the entire supply chain, by 2030, with sustainability in
supply, craftsmanship, packaging and distribution - themes important to our
customers.
We were very proud to be awarded the "Sustainable Luxury Brand of The Year"
award at the Walpole British Luxury Awards on 21 November 2022. Chosen by an
independent panel of experts, we were recognised for the significant progress
we have made towards our Made to Last manifesto. Walpole commended us for
applying sustainability best practice to all parts of the business, from our
longstanding commitment to UK manufacturing in our two carbon neutral Somerset
factories, to our game-changing investment in environmentally accredited
tanneries and carbon neutral leather, as well as our pioneering circular
economy programme, The Mulberry Exchange.
We are carbon neutral across all of our UK operations and 100% of the leather
we use comes from environmentally accredited tanneries. We are offsetting the
carbon emissions related to all leather purchases and currently waiting for
Zero Waste to Landfill certification.
During COVID-19 restrictions in 2020, our UK manufacturing facilities were
transformed to craft thousands of PPE gowns, and quickly distributed to local
NHS trusts.
Sustainable materials in the Mulberry range include ECONYL, Better Cotton,
Eco-Scotchgrain, Bio-Acetate, recycled polyester/nylon, and responsibly
sourced down and feathers. All Mulberry green paper packaging is cup cycled,
with more than 2.8m cups upcycled to date, and since 2011 all cardboard and
paper is Forest Stewardship Council (FSC) certified.
In May 2022, we launched the Carbon Neutral Lily. We also launched a
partnership with circular rental marketplace, Hurr from June 2022, further
developing the circularity of Mulberry bags.
We are adding digital identities to products, starting with pre-loved bags
from our resale programme, the Mulberry Exchange.
We have been a certified Living Wage employer since 2021, and a hybrid working
policy is in place reducing emissions and costs associated with commuting. We
are also offsetting all carbon emissions associated with business travel.
We have a long history of donating to local charities and organisations, and
as the business grows, we are committed to continuing to support our charity
partners. We categorise our charitable activity into three streams: Strategic
Corporate Partnerships; Tactical Local Partnerships; and Other/Reactive
Partnerships. To help support this strategy we have a dedicated Charity and
Community Committee, made up of a team of Mulberry employees from various
business areas who assist in increasing awareness of our charitable
activities, arranging fundraising and liaising with our partners. During the
period we have donated seventeen pallets of write off leather, fabric, RTW and
offcuts to universities, and we continually donate bags and offcuts to scrap
stores, craft groups and schools.
During the period we commenced the recalculation of our submission to SBTi for
science-based targets, to align with new forestry, land-use and agriculture
guidance. We aim to have targets ready for approval by the end of 2022.
FINANCIAL REVIEW
Group revenue and gross profit
Sales analysis for the 26 weeks to 1 October 2022 compared to the same period
last year is as follows:
2022 2021
£'m £'m % change
Digital 16.3 19.1 -15%
Stores 35.3 36.5 -3%
Retail (omni-channel) 51.6 55.6 -7%
Franchise and Wholesale 13.3 10.1 +32%
Group Revenue 64.9 65.7 -1%
Digital 10.8 14.2 -24%
Stores 23.3 23.8 -2%
Omni-channel - UK 34.1 38.0 -10%
Digital 2.7 2.2 +23%
Stores 9.2 9.6 -4%
Omni-channel - Asia Pacific 11.9 11.8 +1%
Digital 2.8 2.6 +8%
Stores 2.8 3.2 -13%
Omni-channel - Rest of World 5.6 5.8 -3%
Retail (omni-channel) 51.6 55.6 -7%
Q1 Q2 H1 2022
Sales % change Sales % change Sales % change
£'m
£'m
£'m
Digital 8.5 -9% 7.8 -20% 16.3 -15%
Stores 17.5 +5% 17.8 -11% 35.3 -3%
Retail (omni-channel) 26.0 +0% 25.6 -14% 51.6 -7%
Franchise and Wholesale 8.5 +33% 4.8 +30% 13.3 +32%
Group revenue 34.5 +7% 30.4 -9% 64.9 -1%
Group revenue decreased by 1% in the period, with Q1 growth (+7%), being
offset by a decline in retail sales in Q2, impacted by the more challenging
macro-economic environment, with UK total retail sales declining 10%. UK
digital sales were down 24% on the prior period as customers returned to our
stores, and represented 32% of total retail sales (2021: 37%). However, full
price sales in the UK increased by 32% to £16.0m (2021: £13.0m) due to the
continued strategic focus on full price sales.
Asia Pacific retail revenue increased 1% despite a number of COVID-19
restrictions early in the period, particularly within mainland China in the
first quarter. China sales increased 6% in the period, with digital sales
increasing by 23%.
Franchise and wholesale sales increased by 32%, with growth across a number of
regions, particularly within the EU and Asia Pacific.
Gross margin increased to 71% (2021: 69%) supported by our strategic focus on
full-price sales and increased volume efficiencies.
Other operating expenses
Other operating expenses increased by 42% to £48.6m (2021: £34.3m) with a
view to supporting the ongoing growth of the Group.
The prior year period benefitted from business rates relief of £2.0m and a
one-off profit of £5.7m on the early termination and the exit of a lease in
Paris.
In the period we increased marketing expenditure to £8.2m (2021: £5.5m) to
support international projects and build global brand awareness.
In light of the March 2021 IFRIC agenda decision to determine the treatment of
Software as a Service (SaaS) costs, we incurred £0.8m of SaaS implementation
costs (2021: nil) which would previously have been capitalised. We also
increased technology spend to £3.3m (2021: £2.3m) to support ongoing
technological investment.
Other operating expenses also includes £0.2m of costs in relation to the
acquisition of the three stores in Mulberry Sweden, and £0.9m of costs
relating to the financial support and acquisition of assets in Australia.
Loss before tax
The Group's reported loss before tax for the period was £3.8m (2021: profit
before tax of £10.2m, which included a one-off profit of £5.7m on the early
termination and the exit of a lease in Paris and business rates relief of
£2.0m).
The Group's underlying loss before tax was £2.8m (2021: underlying profit
before tax of £4.5m) reflecting the additional investments made in marketing,
technology spend and the acquisition and support of our former franchises in
Sweden and Australia as set out in "other operating expenses" above.
See note 2 below for further details of Alternative Performance Measures.
Taxation
The Group reported a tax charge for the period of £0.3m (2021: £2.9m,
including a £2.4m charge on the profit on the disposal of an intangible lease
asset). The tax charge in the period relates to deferred tax which is
calculated by applying the forecast full year effective tax rate to the
interim result. There is no current tax charge due to the use of brought
forward tax losses.
Balance Sheet
Net working capital, which comprises inventories, trade and other receivables
and trade and other payables increased by £24.3m to £43.7m at the period end
(2021: £19.4m).
This increase was predominantly driven by increased inventories of £16.7m, to
support our strategy to focus on a direct-to-customer model, to mitigate cost
increases, and to prepare for the important festive trading season. We are
managing stock levels in light of the ongoing macro-economic uncertainty and
cost increases.
At the period end, other trade receivables had increased by £4.8m,
principally due to the treatment of SaaS prepayments, and pre-acquisition
costs for the five stores in Australia.
The reduction in other trade payables of £2.9m is due to the timing of the
quarterly VAT payment which has been paid at this period end date.
Lease liabilities (current and non-current) reduced by £12.5m to £60.2m
(2021: £72.7m) due to regular lease payments made in the period.
Cash flow
The net decrease in cash and cash equivalents of £19.5m (2021: increase of
£18.5m) included a £7.0m draw down of the Group's revolving credit facility
(RCF). In the prior period the Group benefitted from the profit and proceeds
from the early termination of the Paris lease, of £5.3m and £13.3m
respectively.
During the period we continued to invest in capital expenditure of £5.2m
(2021: £2.1m) to support longer term growth and increased inventories of
£11.1m to support business growth initiatives.
Additional corporation tax was incurred in the period of £2.4m, in relation
to the profit on disposal of our Paris lease in July 2021. Financial support
was given to ensure the continuity of five stores in Australia, which resulted
in cash advances of £1.7m in the period. Since the period end these stores
have been acquired and are now trading as Mulberry Australia.
The period end cash position was also impacted by the lower revenue and
increased operating expenses incurred during the period.
Borrowing facilities
The Group had bank borrowings relating to drawdowns under its RCF of £7.0m at
1 October 2022 (2021: £nil). The borrowings shown in the balance sheet also
include loans from minority shareholders in the Chinese and Japanese
subsidiaries of £5.6m (2021: £4.8m).
The Group's net cash balance (cash and cash equivalents less overdrafts) at 1
October 2022 was £6.5m (2021: £30.3m).
During the period the Group extended its secured RCF with HSBC until March
2024, with unchanged banking covenants. The covenants are tested quarterly on
a "frozen GAAP" basis (excluding the impact of IFRS 16) and contain a 12-month
rolling EBITDA target ratio and a maximum net debt target.
In addition, the Group has a £4.0m overdraft facility which is renewed
annually.
CONSOLIDATED INCOME STATEMENT
26 WEEKS ENDED 1 OCTOBER 2022
Note
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
Revenue 64,920 65,719 152,411
Cost of sales (18,954) (20,326) (43,106)
Gross profit 45,966 45,393 109,305
Other operating expenses (48,599) (34,260) (85,878)
Other operating income 416 779 1,220
Operating (loss)/profit (2,217) 11,912 24,647
Share of results of associates 36 61 127
Finance income 5 8 19
Finance expense (1,574) (1,769) (3,467)
(Loss)/profit before tax (3,750) 10,212 21,326
Tax charge 4 (279) (2,929) (2,157)
(Loss)/profit for the period (4,029) 7,283 19,169
Attributable to:
Equity holders of the parent (2,715) 7,568 19,985
Non-controlling interests (1,314) (285) (816)
(Loss)/profit for the period (4,029) 7,283 19,169
Basic (loss)/profit per share 5 (6.8p) 12.2p 32.2p
Diluted (loss)/profit per share 5 (6.8p) 12.2p 32.2p
All activities arise from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
26 WEEKS ENDED 1 OCTOBER 2022
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
(Loss)/profit for the period (4,029) 7,283 19,169
Items that may be reclassified subsequently to profit or loss;
Exchange differences on translation of foreign operations 408 (295) (116)
Total comprehensive (expense)/income for the period (3,621) 6,988 19,053
Attributable to:
Equity holders of the parent (1,882) 7,287 19,954
Non-controlling interests (1,739) (299) (901)
Total comprehensive (expense)/income for the period (3,621) 6,988 19,053
CONSOLIDATED BALANCE SHEET
AT 1 OCTOBER 2022
Unaudited Unaudited Audited
1 October 2022 £'000 25 September 2021 £'000 2 April 2022
£'000
Non-current assets
Intangible assets 6,390 6,412 6,056
Property, plant and equipment 16,765 13,521 14,618
Right of use assets 30,453 34,592 32,221
Interests in associates 375 253 335
Deferred tax asset 1,871 635 2,148
55,854 55,413 55,378
Current assets
Inventories 48,726 32,041 36,783
Trade and other receivables 17,984 13,204 15,927
Current tax asset 409 - -
Cash and cash equivalents 6,544 30,328 25,669
73,663 75,573 78,379
Total assets 129,517 130,986 133,757
Current liabilities
Trade and other payables (22,962) (25,845) (24,975)
Current tax liabilities - (1,912) (2,382)
Lease liabilities (11,199) (15,356) (11,108)
Borrowings (3,798) (1,321) (3,278)
(37,959) (44,434) (41,743)
Net current assets 35,704 31,139 36,636
Non-current liabilities
Lease liabilities (49,021) (57,342) (52,547)
Borrowings (8,814) (3,504) (1,721)
(57,835) (60,846) (54,268)
Total liabilities (95,794) (105,280) (96,011)
Net assets 33,723 25,706 37,746
Equity
Share capital 3,004 3,004 3,004
Share premium account 12,160 12,160 12,160
Own share reserve (923) (1,272) (1,269)
Capital redemption reserve 154 154 154
Foreign exchange reserve 1,566 979 1,158
Retained earnings 23,968 14,546 27,006
Equity attributable to holders of the parent 39,929 29,571 42,213
Non-controlling interests (6,206) (3,865) (4,467)
Total equity 33,723 25,706 37,746
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
26 WEEKS ENDED 1 OCTOBER 2022
Share premium account £'000 Own share reserve £'000 Capital re-demption reserve £'000 Foreign exchange reserve £'000 Non-controlling interest £'000
Share Retained earnings £'000 Total £'000 Total equity £'000
capital
£'000
As at 27 March 2021 3,004 12,160 (1,277) 154 1,274 6,957 22,272 (3,566) 18,706
Profit/(loss) for the period
- - - - - 7,568 7,568 (285) 7,283
Other comprehensive expense for the period - - - - (295) - (295) - (295)
Total comprehensive (expense)/income for the period - - - - (295) 7,568 7,273 (285) 6,988
Charge for employee share-based payments - - - - - 24 24 - 24
Own shares - - 5 - - - 5 - 5
Exercise of share options - - - - - (3) (3) - (3)
Non-controlling interest foreign exchange - - - - - - - (14) (14)
As at 25 September 2021 3,004 12,160 (1,272) 154 979 14,546 29,571 (3,865) 25,706
Profit/(loss) for the period
- - - - - 12,417 12,417 (531) 11,886
Other comprehensive income for the period - - - - 179 - 179 - 179
Total comprehensive income/(expense) for the period - - - - 179 12,417 12,596 (531) 12,065
Charge for employee share-based payments - - - - - 45 45 - 45
Own shares - - 3 - - - 3 - 3
Exercise of share options - - - - - (2) (2) - (2)
Non-controlling interest foreign exchange - - - - - - - (71) (71)
As at 27 March 2021 3,004 12,160 (1,269) 154 1,158 27,006 42,213 (4,467) 37,746
(Loss)/profit for the period - - - - - (2,715) (2,715) (1,314) (4,029)
Other comprehensive income for the period - - - - 408 - 408 - 408
Total comprehensive income/(expense) for the period - - - - 408 (2,715) (2,307) (1,314) (3,621)
Charge for employee share-based payments - - - - - 23 23 - 23
Own shares - - 346 - - - 346 - 346
Exercise of share options - - - - - (346) (346) - (346)
Non-controlling interest foreign exchange - - - - - - - (425) (425)
As at 1 October 2022 3,004 12,160 (923) 154 1,566 23,968 39,929 (6,206) 33,723
CONSOLIDATED CASH FLOW STATEMENT
26 WEEKS ENDED 1 OCTOBER 2022
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
Operating (loss)/profit for the period (2,217) 11,912 24,647
Adjustments for:
Depreciation and impairment of property, plant and equipment 1,922 1,850 3,702
Depreciation and impairment of right-of-use assets 3,577 3,257 6,682
Amortisation of intangible assets 835 914 1,778
Gain on lease modifications and lease disposals (243) (548) (2,160)
(Profit)/loss on sale of property, plant and equipment (2) (8) 38
Profit on sale of intangible assets - (5,343) (5,343)
Own shares transferred from trust - 5 8
Share-based payments charge 23 24 69
Operating cash flows before movements in working capital 3,895 12,063 29,421
Increase in inventories (11,960) (604) (5,400)
Increase in receivables (2,057) (595) (3,318)
(Decrease)/increase in payables (1,073) 2,966 2,136
Cash (used)/generated by operations (11,195) 13,830 22,839
Income taxes (paid)/received (2,790) 101 (154)
Interest paid (1,582) (1,772) (3,470)
Net cash(outflow)/inflow from operating activities (15,567) 12,159 19,215
Investing activities:
Interest received 5 8 19
Purchases of property, plant and equipment (4,030) (1,260) (4,419)
Proceeds from disposal of property, plant and equipment 2 8 59
Acquisition of intangible fixed assets (1,179) (868) (897)
Proceeds from disposal of intangible assets - 13,316 13,316
Net cash (used)/generated in investing activities (5,202) 11,204 8,078
Financing activities:
Increase in loans from non-controlling interests 94 165 313
New borrowing 7,000 - -
Principle elements of lease payments (5,840) (4,989) (13,736)
Settlement of share awards - - (5)
Net cash generated/(used) in financing activities 1,254 (4,824) (13,428)
Net (decrease)/increase in cash and cash equivalents (19,515) 18,539 13,865
Cash and cash equivalents at beginning of period 25,669 11,820 11,820
Effect of foreign exchange rate changes 390 (31) (16)
Cash and cash equivalents at end of period 6,544 30,328 25,669
Notes to the condensed financiAL statements
26 WEEKS ENDED 1 OCTOBER 2022
1. GENERAL INFORMATION
Mulberry Group plc is a company incorporated in the United Kingdom under the
Companies Act 2006. The half year results and condensed consolidated
financial statements for the 26 weeks ended 1 October 2022 (the interim
financial statements) comprise the results for the Company and its
subsidiaries (together referred to as the Group) and the Group's interest in
associates. The interim financial statements for the 26 weeks ended 1 October
2022 have not been reviewed or audited.
The information for the 53 weeks ended 2 April 2022 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
statutory accounts for that period were approved by the Board of Directors on
28 June 2022 and have been filed with the Registrar of Companies. The
auditor's report on those statutory accounts was not qualified, did not
include a reference to any matters to which the Auditor drew attention by way
of emphasis without qualifying the report and did not contain statements under
section 498(2) (3) of the Companies Act 2006.
2. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The accounting policies and methods of computation followed in the interim
financial statements are consistent with those as published in the Group's
Annual Report and Financial Statements for the 53 weeks ended 2 April 2022.
These condensed consolidated interim financial statements for the 26 weeks
ended 1 October 2022 have been prepared in accordance 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 53 weeks
ended 2 April 2022, which have been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
The Annual Report and Financial Statements are available from the Group's
website (www.mulberry.com) or from the Company Secretary at the Company's
registered office, The Rookery, Chilcompton, Bath, England, BA3 4EH.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Preparation of the condensed consolidated interim financial statements
requires the Directors to make certain estimates and judgements that affect
the measurement of reported revenues, expenses, assets and liabilities.
The significant accounting judgements and key sources of estimation
uncertainty applied in the preparation of the condensed consolidated interim
financial statements are consistent with those described on pages 83-84 of the
Group's Annual Report and Financial Statements for the 53 weeks ended 2 April
2022.
PRINCIPAL RISKS AND UNCERTAINTIES
The management of the business and the execution of the Group's growth
strategies are subject to a number of risks and uncertainties that could
adversely affect the Group's future development. The principal risks and
uncertainties for the Group, and the key mitigating actions used to address
them are consistent with those outlined on pages 34-39 of the Group's Annual
Report and Financial Statements for the 53 weeks ended 2 April 2022.
ALTERNATIVE PERFORMANCE MEASURES
The alternative performance measure ("APM") used by the Group is underlying
profit/(loss) before tax.
In reporting financial information, the Group presents an APM, which is not
defined or specified under the requirements of IFRS. The Group believes that
this APM, which is not considered to be a substitute for, or superior to, IFRS
measures, provide stakeholders with additional helpful information on the
performance of the business. This APM is consistent with how the business
performance is planned and reported within the internal management reporting
to the Board of Directors. This measure is also used for the purpose of
setting remuneration targets.
The Group makes certain adjustments to the statutory profit or loss measures
in order to derive the APM. 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. Treatment as an
adjusting item provides stakeholders with additional useful information to
assess the year-on-year trading performance of the Group.
Adjusting items are identified and presented on a consistent basis each period
and a reconciliation of reported (loss)/profit before tax to underlying
(loss)/profit before tax is set out below
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
Reconciliation to underlying (loss)/profit before tax
(Loss)/profit before tax (3,750) 10,212 21,326
Store closure credit (210) (5,700) (6,757)
Sweden acquisition costs 193 - -
Australia debtor write off 933 - -
Underlying (loss)/profit before tax - non-GAAP measure (2,834) 4,512 14,569
Underlying basic (loss)profit per share (note 5) (5.3p) 6.8p 24.8p
Underlying diluted (loss)/profit per share (note 5) (5.3p) 6.8p 24.8p
Store closure credit
During the period, 2 stores (2021: 2 stores) were closed. The credit on
disposal relates to the release to the income statement of lease liabilities
of £210,000 (2021: £423,000), a profit on disposal of an intangible asset
£nil (2021: £5,343,000) and a credit for the release of lease exit and
redundancy costs £nil (2021: £66,000).
Sweden acquisition costs
During the period the Group took over the running of three stores in Sweden
previously owned by the Swedish franchisee. The Group incurred costs of
£193,000 (2021: £nil).
Australian debtor write off
During the period the Group took over the running of five stores in Australia
and incurred a write-off of debtors of £933,000 (2021: £nil).
3. GOING CONCERN
In determining whether the Group's accounts can be prepared on a going concern
basis, the Directors considered the Group's business activities and cash
requirements together with factors likely to affect its performance and
financial position.
The Group had net cash of £6.5 million (2021: £30.3 million) and deferred
liabilities of £nil (2021: £5.0m) at 1 October 2022 and had drawn down
£7.0million (2021: £nil) on its revolving credit facility. The Directors
have also reviewed the 12-month forecasts including their resilience in the
face of possible downside scenarios.
Based on the assessment outlined above, the Directors have a reasonable
expectation that the Group has access to adequate resources to enable it to
continue to operate as a going concern for the foreseeable future. For these
reasons, the Directors consider it appropriate for the Group to continue to
adopt the going concern basis of accounting in preparing the Interim Report
and financial statements.
4. TAXATION
The tax charge relates to deferred tax which is calculated by applying the
forecast full year effective tax rate to the interim (loss)/profit and
calculating the deferred tax balance for the period.
5. EARNINGS PER SHARE ('EPS')
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
Basic (loss)/profit per share (6.8p) 12.2p 32.2p
Diluted (loss)/profit per share (6.8p) 12.2p 32.2p
Underlying basic (loss)/profit per share (5.3p) 6.8p 24.8p
Underlying diluted (loss)/profit per share (5.3p) 6.8p 24.8p
Earnings per share is calculated based on the following data:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
(Loss)/profit for the period for basic and diluted earnings per share (4,029) 7,283 19,169
Adjustments to exclude exceptional items:
Store closure credit* (206) (3,242) (4,411)
Sweden acquisition costs 193 - -
Australia debtor write off* 855 - -
Underlying (loss)/profit for the period for basic and diluted earnings per (3,187) 4,041 14,758
share
*These items are included net of tax
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks ended 2 April 2022
1 October 2022 £'000 25 September 2021 £'000 £'000
Weighted average number of ordinary shares for the purpose of basic EPS 59.6 59.5 59.5
Effect of dilutive potential ordinary shares: share options - - -
Weighted average number of ordinary shares for the purpose of diluted EPS 59.6 59.5 59.5
The weighted average number of ordinary shares in issue during the period
excludes those held by the Employee Share Trust.
6. BUSINESS AND GEOGRAPHICAL SEGMENTS
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the Chief
Operating Decision Maker ("CODM"), defined as the Board of Directors, to
allocate resources to the segments and to assess their performance.
Inter-segment pricing is determined on an arm's length basis. The Group also
presents analysis by geographical destination and product categories.
(a) Business segment
For the financial years to March 2020 and March 2021, the Group changed its
segmental reporting to show a consolidated view of the Group's performance as
one operating (and reporting) segment, reflecting the level of information the
CODM considered the most appropriate to monitor business performance and
allocate resources to support the growth of the Mulberry brand as a whole.
In the past financial year, the Group has extended its omni-channel network in
order to support the Group's global growth ambitions. Mulberry has thus become
increasingly reliant on individual market-level profitability metrics to
enable them to make timely market-centric decisions that are operational and
investment in nature. For the 53 week period ending 2 April 2022, the Group
updated the segmental analysis disclosures away from a consolidated view of
segments and moved towards a more regional view of segments (being UK, Asia
Pacific and Other International) to reflect the current business operations
and the way the business internally reports, and the information that the CODM
reviews and makes strategic decisions based on its financial results. As a
result of this change in approach the prior year numbers for the 26 weeks
ended 25 September 2021 have been restated.
The principal activities are as follows:
The accounting policies of the reportable segment are the same as described in
the Group's financial statements. Information regarding the results of the
reportable segment is included below. Performance for the segment is assessed
based on operating profit/(loss).
GROUP INCOME STATEMENT
26 WEEKS ENDED 1 OCTOBER 2022
Other International
UK Asia Pacific £'000 Eliminations £'000 Total
£'000 £'000 £'000
Revenue
Omni-channel 72,280 11,826 5,120 (37,665) 51,561
Wholesale 2,182 3,141 8,036 13,359
Total revenue 74,462 14,967 13,156 (37,665) 64,920
Segment profit/(loss) 665 (1,969) 1,703 399
Central costs (1,700)
Store closure credit 210
Sweden acquisition costs (193)
Australia debtor write off (933)
Operating loss (2,217)
Share of results of associates 36
Finance income 5
Finance expense (1,574)
Loss before tax (3,750)
Other International
UK Asia Pacific £'000 Central Total
£'000 £'000 £'000 £'000
Segment capital expenditure 2,786 614 1,429 29 4,858
Segment depreciation and amortisation 3,955 926 457 996 6,334
Segment assets 84,413 20,994 14,132 8,107 127,646
Segment liabilities 62,229 8,617 14,341 10,607 95,794
26 WEEKS ENDED 25 SEPTEMBER 2021
Other International
UK Asia Pacific £'000 Eliminations £'000 Total
£'000 £'000 £'000
Revenue
Omni-channel 71,057 11,550 5,550 (32,507) 55,650
Wholesale 7,508 589 1,972 10,069
Total revenue 78,565 12,139 7,522 (32,507) 65,719
Segment profit/(loss) 7,269 (152) 848 7,965
Central costs (1,753)
Store closure credit 5,700
Operating profit 11,912
Share of results of associates 61
Finance income 8
Finance expense (1,769)
Profit before tax 10,212
Other International
UK Asia Pacific £'000 Central Total
£'000 £'000 £'000 £'000
Segment capital expenditure 1,028 1,126 - 16 2,170
Segment depreciation and amortisation 4,429 295 291 1,006 6,021
Segment assets 89,018 17,124 10,967 13,342 130,351
Segment liabilities 65,371 8,130 15,291 16,488 105,280
53 WEEKS ENDED 2 APRIL 2022
Other International
UK Asia Pacific £'000 Eliminations £'000 Total
£'000 £'000 £'000
Revenue
Omni-channel 163,727 27,551 11,849 (72,960) 130,167
Wholesale 3,968 3,862 14,414 22,244
Total revenue 167,695 31,413 26,263 (72,960) 152,411
Segment profit/(loss) 10,297 (232) 7,356 17,421
Central costs 469
Store closure credit 6,757
Operating profit 24,647
Share of results of associates 127
Finance income 19
Finance expense (3,467)
Profit before tax 21,326
Other International
UK Asia Pacific £'000 Central Total
£'000 £'000 £'000 £'000
Segment capital expenditure 2,216 2,321 1,000 71 5,608
Segment depreciation and amortisation 8,639 954 565 2,004 12,162
Segment assets 89,026 20,707 11,701 10,175 131,609
Segment liabilities 61,682 8,221 13,597 12,511 96,011
For the purposes of monitoring segment performance and allocating resources
between segments, the Chief Operating Decision Maker, which is deemed to be
the Board, monitors the tangible, intangible and financial assets. All assets
are allocated to the reportable segment.
(b) Product categories
Leather accessories account for around 90% of the Group's revenues, of which
bags represent over 70% of revenues. Other important product categories
include small leather goods, shoes, soft accessories and women's
ready-to-wear. Net asset information is not allocated by product category.
7. EVENTS AFTER THE REPORTING PERIOD
On 11 November 2022 the Group acquired the assets of five stores in Australia
that had been previously operated by a franchisee. The stores will now be
managed by our subsidiary Mulberry Company (Australia) Pty Limited.
The Group acquired fixed assets of £1.8m and inventories of £0.6m and will
settle employee liabilities of £0.2m. In addition, the Group has written off
debtors of £0.9m (see note 3).
(#_ftnref1)
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