REG - Mulberry Group PLC - Preliminary results
28/06/2023 07:00
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RNS Number : 1202E Mulberry Group PLC 28 June 2023
Mulberry Group plc
Preliminary results for the 52 weeks ended 1 April 2023
A year of further progress; continuing to deliver on strategic objectives
Mulberry Group plc ("the Group" or "Mulberry"), the British luxury brand,
announces results for the 52 weeks ended 1 April 2023 (the "period").
THIERRY ANDRETTA, CHIEF EXECUTIVE OFFICER, COMMENTED:
"We have delivered a positive Group performance this year thanks to our unique
brand identity, beautiful innovative products and market-leading omni-channel
proposition. Our Made to Last Manifesto also continues to set us apart and
ensures that sustainability remains central to our strategy, with our ambition
to transform to a regenerative and circular model across our supply chain by
2030 firmly on track. We made further progress during the period, reaching our
target of sourcing 100% of our leather from tanneries with environmental
accreditations including Leather Working Group and Sustainable Leather
Foundation while all other materials and packaging used remain fully
sustainable and recyclable. We continued to expand our circularity programme
offering our pre-loved bags in the UK and Europe and restoring over 10,000
bags every year.
We have made significant investments in the Company this year, as well as
expanding our direct-to-customer model with the recent acquisitions of
businesses in Sweden and Australia. I am also delighted today to announce we
now have full ownership of Mulberry Japan Co. Limited. These investments
were supported by our transformation function, designed to support the
delivery of our strategy, with a particular focus on projects and systems that
will underpin our growth in the longer term.
We are well set for the year ahead with the right strategy in place to deliver
on our growth plans. Finally, I want to thank colleagues for their continued
dedication to Mulberry, bringing their creativity and commitment to our
business."
Financial Highlights
· Group revenue up 4% to £159.1m (2022: £152.4m) as we continued to
deliver on strategic objectives, despite macro-economic uncertainty
o UK retail sales of £87.7m (2022: £88.5m). The first half of the year in
particular was impacted by the broader economic environment, however
performance improved in the second half
o Asia Pacific retail sales increased by 3% to £28.9m (2022: £28.0m),
despite a number of COVID-19 lockdowns in the region, particularly in China
and South Korea
o International retail sales increased 12% to £46.5m (2022: £41.7m)
o Digital sales £48.4m (2022: £47.5m) up 2% and representing 30% of total
revenue (2022: 31%). This continues to be above pre COVID-19 levels
· Maintained gross margins of 71.2% (2022: 71.7%) with full price
retail sales increasing by 6% and representing 78% of total retail sales
(2022: 76%)
· Underlying profit before tax of £2.5m (2022: profit before tax
£14.6m) included £4.0m (2022: £0.5m) of Software as a Service (SaaS) costs
and additional investment in the Group
· Reported profit before tax of £13.2m (2022: profit before tax
£21.3m)
· The Group's revolving credit facility of £15.0m has been
extended until September 2027
Operating Highlights
· Three stores in Sweden and five stores in Australia previously owned
by our franchise partners were acquired during the period further developing
our direct-to-customer model
· Launch of the new M Zip bag family in November 2022, followed in
December 2022 by the Link bag family
· Gross margins maintained with a continued strategic focus on full
price sales and increased volume efficiencies
· Digital sales represented 30% of Group revenue (2022: 31%). This
was 24% in 2020 and reflects the ongoing strength and importance of this
channel
· Established a transformation function to support the delivery of our
strategy, including projects and systems that will underpin our growth in the
longer term
Sustainability Highlights
· 100% of all leather, suede and nappa is sourced from tanneries
with environmental accreditations, which include Leather Working Group,
Sustainable Leather Foundation and ISO:14001
· In November 2022, awarded the Sustainability Luxury Brand of the
Year at the Walpole British Luxury Awards and in February 2023 were recognised
by the Great British Brands Awards for Championing the Planet, recognising our
accelerated progress towards achieving a truly regenerative and circular
business
· Carbon reduction targets submitted to the Science-Based Targets
initiative (SBTi) in February 2023
· Lifetime Service Centre at The Rookery, which is now restoring
more than 10,000 bags a year
· Within our circular Mulberry Exchange programme, we have expanded
the use of our camera technology to give customers a true-to-life view of
every preloved bag
Current Trading and outlook
· Group revenue for the first 12 weeks of the new financial year is
6% ahead of last year
· Retail revenue is up 15%, with our newly acquired Sweden and
Australia stores continuing to perform well
o International retail sales are 46% above the same period last year
o Asia Pacific retail sales 34% above the same period last year, which now
includes our newly acquired stores in Australia
o As anticipated, due to the impact of the broader economic environment, UK
retail sales are in line with the same period last year
· Total franchise and wholesale revenue is up 5% against the same
period last year, excluding stores now reported within omni-channel revenue
· As part of the Group's strategy to expand the direct-to-consumer
model, Mulberry plc now has full ownership of Mulberry Japan Co. Limited, with
effect from 27 June 2023
FOR FURTHER DETAILS PLEASE CONTACT:
Mulberry Group plc
Charles Anderson (Group Finance Director)
TEL: +44 (0) 20 7605 6793
Headland (Public Relations)
Lucy Legh / Joanna Clark
mulberry@headlandconsultancy.com (mailto:mulberry@headlandconsultancy.com)
TEL: +44 (0) 20 3805 4822
Houlihan Lokey UK Limited (Financial and Nominated Adviser)
Tim Richardson
TEL: +44 (0) 20 7484 4040
Chairman's Letter
Dear Shareholder,
This is my first set of results as Chairman of Mulberry, following over 20
years in the business as a non-executive Director. In this new position, since
my appointment I have continued to see Mulberry deliver against its strategic
growth plan as one of the most iconic British luxury brands, with a rich
heritage and reputation.
As a Board we are responsible for the long-term success of the Company and as
part of that, I remain committed to achieving the best standards of
governance. To do this, the Board has a mix of skillsets and experience across
the luxury sector and the public markets. We are well advanced in broadening
the skills base and experience still further with the appointment of an
additional independent non-Executive director, which I expect will be
announced shortly.
The Group is in a strong position to continue with strategic growth plans,
taking the opportunities to accelerate our direct-to-customer model,
maintaining our full price strategy and crucially, continuing to produce
beautiful products in our Somerset factories and serving our customers in both
our welcoming stores and on our market-leading digital platform.
Whilst we see every opportunity for Mulberry to continue to succeed, we must
remain mindful of the external climate and ongoing sector headwinds including
high inflation. The Board is recommending a final dividend for the 52-week
period to 1 April 2023 of 1 pence per ordinary share (2022: 3 pence per
ordinary share) to be paid, (subject to shareholder approval) on 24 November
2023 to shareholders on the register at 27 October 2023.
We have made excellent progress so far and while there is much more to do, we
are confident that we have the right strategy in place to continue to deliver
for our shareholders and broader stakeholders alike.
I would like to thank our teams again for all their hard work this year.
Christopher Roberts
Chairman
27 June 2023
Strategic Report
Chief Executive's Statement
Overview
We have continued to deliver on our strategic objectives despite a backdrop of
macro-economic uncertainty, which demonstrates that the decisions we have
taken over the last few years have contributed to our long-term resilience.
The work of building Mulberry as a sustainable global luxury brand is making
good progress based on each of our four strategic pillars: omni-channel
distribution; international development; constant innovation; and sustainable
lifecycle. Much of this progress is thanks to the hard work and commitment of
our many colleagues around the world and I recognise and thank them for their
enduring efforts.
Progress against our strategy
Our investment in omni-channel distribution and international development
continued during the period, especially in Asia Pacific where our business
continues to make great progress. With the acquisitions made during the
period, Australia and Sweden, we are well positioned to deliver on our
strategy. We established a transformation function to support its delivery,
with a particular focus on systems that will underpin our growth in the longer
term. These include further enhancements to our store and digital platforms to
build on our omni-channel capabilities and changes to our back-office systems,
which will enhance efficiency, streamline our operations and support the
continued evolution of the business.
Our omni-channel approach allows our customers to use Mulberry.com and our
store network to research, buy and return our products in the way that suits
them. With our established digital channel, we are well positioned to adapt to
changing customer preferences between different retail channels. In line with
our omni-channel distribution strategy, we have launched new digital platforms
in Korea - Naver.com and GS.com - and we also have a digital concession at
Harrods in the UK.
We continued to develop our business in Asia Pacific, despite the impact of
COVID-19 in China, opening new stores in China and Korea. Further
international developments included the relocation of our flagship store in
New York and the refurbishment of our Amsterdam store.
In October 2022, we opened a new store at the iconic Battersea Power Station
development. In February 2023 we made the difficult decision to close our Bond
Street store. Much of our business came from its popularity with tourists
enjoying the VAT-free shopping environment. However, when this was removed, we
saw a dramatic drop in footfall and sales. We have redeployed all Bond Street
colleagues across our London store network.
We continued to build our direct-to-customer model which enables us to engage
with our customer, progress our pricing strategy and maintain our brand
positioning. In September 2022 we launched Mulberry Sweden following the
acquisition of three stores previously operated by our Swedish franchisee. We
also acquired the assets of five stores in Australia previously owned and run
by our Australian franchisee, having provided financial support to the
business during the period. We will now operate these stores and online,
directly as Mulberry Australia.
Trading Performance
Trading in the first half of the period was challenging, primarily driven by
the macro-economic environment in the UK and ongoing COVID-19 lockdowns in
China. We saw an improvement in retail revenue over the second half, with
Group revenue 9% ahead of the same period last year. This was helped by an
improving environment in China over recent months and under-pinned by our
direct-to-customer model and increased brand awareness.
Group revenue for the period increased by 4% and our continued strategic focus
on full price sales helped to maintain the gross margin at 71%.
Asia Pacific retail revenue grew by 3%, despite the COVID-19 lockdowns,
particularly in China and South Korea. This region also now includes our newly
acquired stores in Australia and we are pleased with their performance at this
early stage.
Franchise and wholesale revenue increased by 12% as our partners continued
their recovery post COVID-19 and demand increased. This was despite taking
full ownership of stores in Sweden and Australia during the period, which
would previously have been classified as franchise and wholesale revenue.
Operational performance
I am proud of our growing product range, which is tailored to the varying
preferences of both traditional Mulberry store purchasers and digital
shoppers. The emphasis continues to be on high quality and full price sales,
as we champion beautiful products, which are made to last, in our
carbon-neutral Somerset factories.
Our continuing investment in the Asia Pacific region during the year, despite
a number of ongoing COVID-19 restrictions has further helped diversify our
network and we have seen an improving environment in China over recent months.
Made to Last
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 will achieve this through
product innovation and continuing our progress to a regenerative and circular
business model, whilst striving to implement pertinent practices into our own
operations and wider supply chain.
We continue to innovate in materials and product. We source all our leather,
suede and nappa from tanneries with environmental accreditations. All of the
non-leather materials we use are also fully sustainable. Furthering our
partnership with the World Land Trust, we are offsetting the carbon emissions
associated with our leather purchasing, another small step on our ambitious
path to reduce our overall carbon footprint.
Supporting circularity, our Lifetime Service Centre - where customers can have
their products repaired and renewed - now restores more than 10,000 bags a
year. Our resale programme, Pre-loved Bags, helps ensure many of our products
are used and valued for generations. Our buy-back scheme, The Mulberry
Exchange, enables customers to return their Mulberry bag and receive a credit
towards a new one.
In November 2022, we won the award for Sustainability Luxury Brand of the Year
at the Walpole British Luxury Awards and in February 2023 our accelerated
progress towards achieving a truly regenerative and circular business was
recognised by the Great British Brands Awards for Championing the Planet.
Financial performance
Despite the ongoing challenges and volatility in the period, particularly in
the UK and China, Group revenue increased by 4% over the prior year and
overall gross margin was maintained at 71.2% (2022: 71.7%) due to our
continued focus on full price sales and volume efficiencies. Underlying profit
for the period of £2.5m (2022: £14.6m) included £4.0m (2022: £0.5m) of
Software as a Service (SaaS) costs, additional investment in the Group and the
additional operational costs of our new stores in Sweden and Australia. The
prior period also benefitted from £3.5m of COVID-19 related reliefs.
A reported profit before tax of £13.2m (2022: £21.3m), includes impairment
reversals for our Bond Street and Regent Street stores of £14.8m, as a result
of the closure of Bond Street in February 2023.
Digital sales were 30% (2022: 31%) of Group revenue in the period, reflecting
the ongoing strength of this channel and our omni-channel approach. China
retail sales increased by 2% despite being impacted by a number of COVID-19
lockdowns throughout the period.
We ended the year with net cash of £0.7m (2022: £25.7m). During the period
we continued to invest in projects and systems that will underpin our growth
in the longer term and continued to invest in the Group's global brand
awareness.
Supported by the new transformation function, projects are being progressed to
update the Group's legacy systems and to build on our omni-channel
capabilities. We expect this increase in investment to continue in current
year and beyond.
As a business we continue to manage 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
increases. We 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.
Current Trading and Outlook
Group revenue for the first 12 weeks of the new financial year is 6% ahead of
last year. Omni-channel (stores and digital) revenue is up 15%, with our newly
acquired Sweden and Australia stores continuing to perform well.
Total international retail sales are 46% above the same period last year.
Asia Pacific retail sales are up 34% , which now includes our newly acquired
stores in Australia. As anticipated, due to the impact of the broader economic
environment, UK retail sales are in line with the same period last year.
Total franchise and wholesale revenue is up 5% against the same period last
year, excluding stores now reported within omni-channel revenue.
On 25 May 2023 Mulberry was awarded the "Brand of the Year" award at the
Drapers Sustainable Fashion Awards. We were recognised for the progress made
on our Made to Last manifesto goals, including our ongoing commitment to a Net
Zero future. We were also praised for our thriving apprenticeship program
which nurtures the next generation of craftspeople and manufacturing leaders
and our longstanding commitment to British manufacturing.
We continue to build and optimise our global network and from 27 June 2023 the
Group now holds 100% ownership of Mulberry Japan.
Notwithstanding the ongoing uncertainty in the economic and geopolitical
environment, we are confident in our strategy and continue to invest,
including in further store openings across the network planned later this
year. We remain focused on reaching our goal to be the leading sustainable
global luxury brand, to the benefit of all our stakeholders.
Thierry Andretta
Chief Executive Officer
27 June 2023
Progress against our strategy
With our rich heritage in leather craftmanship and reputation for innovation,
we strive to grow the Group through our four strategic pillars which focus on
omni-channel distribution, international development, constant innovation and
a sustainable lifecycle.
Strategic Pillar 1
Omni-channel distribution
We look to continually enhance our omni-channel distribution model. This
includes through selective store openings, the continued roll-out of the
latest Mulberry store concept and further enhancements to our digital
platforms. Our latest store concept enables us to better display and promote
our collections through innovative customer-facing technology. It creates more
space and supports our omni-channel proposition and has helped to elevate our
brand position, outperforming more traditional outlets.
Aligned with our strategic growth plans and omni-channel approach to
distribution, we also look to continue to build on our direct-to-customer
model and reduce our franchised operations. This allows us to increase our
focus on customer experience and grow the proportion of our omni-channel
business.
We ended the period with 111 points of sale. During the period we acquired our
Swedish and Australian stores previously operated by our franchise partners,
as well as new agreements with Nordstrom and Selfridges.
In the UK we operated 40 retail stores (own stores and concessions run by our
employees) at the year end, which included 15 John Lewis and four House of
Fraser concessions. In February 2023 we took the difficult decision to close
our Bond Street store in London. The lack of VAT-free shopping in the UK and
the decline in tourist shoppers had impacted footfall and sales. All
colleagues were re-deployed across our London store network.
Virtual and in-store appointments continued to drive value, accounting for 8%
of all UK store sales during the period and resulting in a larger average
transaction value than for walk-in customers.
In Asia Pacific, following the conversion of five stores in Australia, we
operated 43 retail stores at the year end (2022: 37). China experienced a
number of store closures and lockdowns which had a significant impact on
revenue and South Korea was also impacted with reduced footfall throughout the
period. Full price mix of retail sales in Asia Pacific increased to 76% (2022:
75%) driven by higher sell-throughs and reduced mark-down periods.
During the year, 30% of Group revenue came from digital sales, demonstrating
the continuing trend towards omni-channel shopping across all regions. In
Asia Pacific, digital sales were 22% of the region's sales and are now
supported by local fulfilment in Japan and Korea and a concession gift channel
with Korean messenger platform Kakao. During the period we also launched new
platforms in Korea, Naver.com and GS.com, as well as Little Red Book in China.
Strategic Pillar 2
International Development
Our continued investment in our international subsidiaries supported the
Group's overall growth. During the period, we opened stores in the region at
Nanjng Deji, China, in April 2022, a pop-up in Gwang Ju, Korea, in May 2022,
Chengdu SKP and Hainan duty free store, both in China in October 2022. We
launched on new digital platforms in Korea, Naver.com and GS.com and Little
Red Book in China. The openings further enhance brand awareness, strengthen
our luxury positioning and support our full-price strategy.
The acquisition of our franchise stores in Sweden and Australia represented
further progress in our international development, along with the opening of
our first men's concession in NK Stockholm in March 2023.
New agreements are in place with Nordstrom in the US and Selfridges in the UK,
further developing our direct-to-customer model. At the period end, we
operated three Nordstrom concessions as well as a digital platform, with the
view to expand this further in the current financial period.
Further international developments include the relocation of our flagship
store in New York in April 2022, the refurbishment of our Amsterdam store in
June 2022 and the opening of a standalone store in Dublin in January 2023.
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.
We launched the Softie family in February 2022, with new colours and shapes
being added throughout the year, targeting a younger luxury customer. In
September 2022, we 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, we launched
micro bags for a number of our iconic bag families. This bridged the gap
between our small leather goods and our bags and made our icons more
affordable and potentially appealing to a broader range of customers.
In November 2022 we launched M Zip, a modern, M-shaped silhouette available in
three sizes. This was followed in December 2022 by Link, a re-interpretation
of our previous soft shaped Leighton bag, a fresh take on a beloved classic,
available in two sizes.
Mulberry x Miffy launched at the end of December 2022, to celebrate the Lunar
new year of the Rabbit, featuring Miffy across a series of bags and
accessories. This collection further supported the Group's ongoing commitment
to sustainable innovation through its Made to Last ethos; sustainable products
made with 100% environmentally accredited carbon neutral leather.
The exciting Mulberry x Paul Smith collaboration will launch in Autumn 2023.
With a shared approach to heritage style and sustainable innovation, the
ten-piece capsule reworks our timeless Antony bag, utilising pops of primary
colours alongside Paul Smith's hallmark Signature Stripe.
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 are carbon neutral across all of our UK operations and source all the
leather, suede and nappa we use from tanneries with environmental
accreditations. For over five years, we have worked with our tannery partners
to help them improve their environmental standards and achieved certification,
stimulating positive changes within the whole leather industry. We have also
taken on new tanneries that already have certification. Other 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.
In February 2023, we submitted our science-based targets for carbon reduction
to the Science Based Targets Initiative (SBTi). We expect to have our targets
approved and validated by the end of 2023. Furthering our partnership with
World Land Trust, we are also offsetting the carbon emissions associated with
our leather purchasing through their Carbon Balanced programme. Our project
aims to protect approximately 316,000 acres of tropical rainforest and other
habitats in Guatemala to prevent the area from being cleared to make way for
cropland and pasture. Carbon offsetting is a small step on our ambitious path
to reducing our overall business carbon footprint, with an aim of achieving
net zero by 2035.
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 will continue 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, our Charity and Community Committee, made up of Mulberry
employees from various business areas, help increase awareness of our
charitable activities, arrange fundraising and liaise with our partners.
During the period we have donated seventeen pallets of write-off leather,
fabric, ready to wear and offcuts to universities and we regularly donate bags
and offcuts to scrap stores, craft groups and schools.
We were very proud to be recognised for several awards during the period:
· Sustainable Luxury Brand of The Year award at the Walpole British
Luxury Awards in November 2022, recognising the significant progress we have
made towards our Made to Last manifesto.
· Championing the Planet award at the Great British Brands Awards
for our outstanding work in getting ahead of our targets to achieve a truly
regenerative and circular business.
· On 25 May 2023 Mulberry was awarded the "Brand of the Year" award
at the Drapers Sustainable Fashion Awards. We were recognised for the progress
made towards our Made to Last manifesto goals, including our ongoing
commitment to Net Zero future. We were also praised for our thriving
apprenticeship program which nurtures the next generation of craftspeople and
manufacturing leaders and our longstanding commitment to British
manufacturing.
Financial review
Group revenue and gross profit
£m 52 weeks ended 1 April 2023 53 weeks ended 2 April 2022 % Change
Group Digital 48.4 47.5 2%
Stores 85.8 82.7 4%
Retail (omni-channel) 134.2 130.2 3%
Franchise and Wholesale 24.9 22.2 12%
Group Revenue 159.1 152.4 4%
UK Digital 33.8 35.7 (5%)
Stores 53.9 52.8 2%
Omni-channel - UK 87.7 88.5 (1%)
Asia Pacific Digital 6.3 5.8 9%
Stores 22.6 22.2 2%
Omni-channel - Asia Pacific 28.9 28.0 3%
ROW Digital 8.3 5.9 41%
Stores 9.3 7.8 19%
Omni-channel - Rest of World 17.6 13.7 28%
Retail (omni-channel) 134.2 130.2 3%
Franchise and Wholesale UK 3.4 2.8 21%
Asia Pacific 4.2 3.9 8%
Rest of world 17.3 15.5 12%
Franchise and Wholesale 24.9 22.2 12%
Group revenue for the period increased by 4% over the prior period, with the
challenges of the first half of the year, being offset by increased revenues
across the second half.
£m H1 H2 FY
FY23 FY22 % Change FY23 FY22 % Change FY23 FY22 % Change
Group Digital 16.3 19.1 (15%) 32.1 28.4 13% 48.4 47.5 2%
Stores 35.3 36.5 (3%) 50.5 46.2 9% 85.8 82.7 4%
Retail (omni-channel) 51.6 55.6 (7%) 82.6 74.6 11% 134.2 130.2 3%
Franchise and Wholesale 13.3 10.1 32% 11.6 12.1 (4%) 24.9 22.2 12%
Group Revenue 64.9 65.7 (1%) 94.2 86.7 9% 159.1 152.4 4%
UK retail sales were 1% below the prior period, with growth impacted by the
challenging macro-economic environment particularly in the first half of the
year. The second half saw an improved performance, with UK retail revenue 6%
ahead of the same period last year. UK digital sales declined by 5%
year-on-year and represented 39% of UK retail sales (2022: 40%) and still well
above pre COVID-19 levels. In line with overall trends UK digital sales in the
second half grew 6% above the prior period. Omni-channel full price sales in
the UK increased by 3% to £68.9m (2022: £67.1m), representing 79% (2022:
76%) of total omni-channel revenue for the period.
Asia Pacific retail revenue increased by 3%. From November 2022, this region
now includes the five stores in Australia now wholly owned by the Group.
During the period footfall in the Asia Pacific region was heavily impacted by
a number of COVID-19 related restrictions and lockdowns, particularly within
China and South Korea.
Franchise and wholesale sales increased by 12%, despite a number of previously
franchised stores being recategorised as retail during the period.
Continuing our strategic focus on full-price sales, gross margin during the
period was maintained at 71.2% (2022: 71.7%), despite actions taken during the
second half to optimise inventory levels.
Key Performance Indicators
Key performance indicators (KPIs) help management to measure progress against
the Group's strategy. Currently the focus is on financial KPIs, which include
total revenue, gross margin and profit before tax, all of which are discussed
within this financial review.
Other Operating Expenses
Other operating expenses in the period increased by 26% to £108.5m (2022:
£85.9m), with underlying operating expenses increasing by 6%. A breakdown of
which is given below;
£m 52 weeks ended 1 April 2023 53 weeks ended 2 April 2022 % Change
Operating expenses 36.0 36.7 (2%)
Staff Costs 44.2 40.7 9%
Depreciation and Amortisation 13.9 12.2 14%
Systems & Comms 7.0 5.7 23%
Foreign exchange gain (0.2) (0.1) 100%
Underlying operating expenses 100.9 95.2 6%
SaaS Costs 4.0 0.5 700%
Store Closure Credit (0.2) (6.8) (97%)
New initiatives - Sweden & Australia 3.8 - -
7.6 (6.3) (221%)
COVID-19 Relief - (3.0) -
- (3.0) -
108.5 85.9 26%
The prior period benefitted from COVID-19 related business rates and rent
relief of £3.0m. These schemes were not available in the period to 1 April
2023.
The prior period also benefited from store closure credits of £6.8m, which
largely related to the disposal of the Paris lease.
In light of the March 2021 IFRIC agenda decision to clarify the treatment of
Software as a Service (SaaS) costs, during the period we expensed £4.0m
(2022: £0.5m) of SaaS costs, in line with the accounting for configuration
and customisation cost arrangements. We expect to incur further SaaS costs in
the current period. We also increased technology spend to £7.0m (2022:
£5.7m) to support the investment in projects and systems investments.
The acquisition of our stores in Sweden and Australia have increased costs
during the period by £3.8m. The full year impact of these new initiatives
will be included in the current period.
Other Operating Income
Included within other operating income is £nil (2022: £0.5m) of grants
receivable in non-UK territories for COVID-19 relief.
Profit before tax
The Group's underlying profit for the period was £2.5m (2022: £14.6m),
included £4.0m (2022: £0.5m) of Software as a Service (SaaS) costs,
additional investment in the Group and the additional operational costs of our
new stores in Sweden and Australia. The prior period also benefitted from
£3.5m of COVID-19 related reliefs.
Reported profit before tax for the period was £13.2m (2022: profit before tax
£21.3m) and includes impairment reversals of £14.8m in relation to Bond
Street and Regent Street, as a result of the closure of the Bond Street store
in February 2023, net of an impairment charge of £2.4m in respect of Korea
goodwill.
£m 52 weeks ended 1 April 2023 53 weeks ended 2 April 2022
Underlying profit before tax pre SaaS costs 6.5 15.1
SaaS costs 4.0 0.5
Underlying profit before tax 2.5 14.6
Store closure credit 0.2 6.7
Net Impairment credit 11.4 -
Australia and Sweden acquisition costs (1.0) -
Reported profit before tax 13.2 21.3
Taxation
The Group reported a tax charge of £1.8m (2022: charge £2.2m), an effective
rate of tax of 13% (2022: 10%). The effective tax rate is lower than the UK
tax rate of 19%, primarily due to the use of prior year tax losses, which were
not recognised as a deferred tax asset.
Balance Sheet
Net working capital, which comprises inventories, trade and other receivables
and trade and other payables increased by £12.3m to £40.0m at the period end
(2022: £27.7m).
This increase was predominantly driven by increased inventories of £11.5m, to
support our strategy to focus on a direct-to-customer model. We have taken
actions during the second half of the year to optimise inventory levels and
continue to closely monitor inventory levels, in light of continued
macro-economic uncertainty.
At the period end, other trade receivables were £19.9m (2022: £15.9m), the
increase principally due to the treatment of SaaS prepayments, as well as
timing of rent and rates prepayments at the period end. Trade and other
payables increased by £3.1m to £28.1m (2022: £25.0m) largely driven by
timing of payments due.
Dividends
The Board is proposing a final dividend for the 52-week period to 1 April 2023
of 1 pence per ordinary share (2022: 3 pence per ordinary share) to be paid,
(subject to shareholder approval) on 24 November 2023 to shareholders on the
register at 27 October 2023.
Cashflow
The net decrease in cash and cash equivalents of £19.0m (2022: increase of
£13.9m) included a £4.0m drawdown of the Group's revolving credit facility
(RCF) and £2.1m of overdraft utilisation. In the prior period the Group
benefitted from the proceeds from the early termination of the Paris lease of
£13.3m.
During the period we continued to invest including £11.0m (2022: £5.3m) of
capital expenditure, £4.0m (2022: £0.5m) of SaaS costs and £3.2m (2022:
£nil) of acquisition costs. This spend supports investment in our
omni-channel distribution and international development, including the
development of a new digital platform and the acquisition of new stores in
Sweden and Australia.
Inventories have also increased by £11.5m to support our strategy to focus on
our direct-to-customer model as well as mitigate any cost increases.
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.
Borrowing Facilities
The Group had bank borrowings related to drawdowns under its revolving credit
facility (RCF) of £4.0m at 1 April 2023 (2022: £nil). The borrowings shown
in the Balance Sheet also include loans from minority shareholders in the
Chinese and Japanese subsidiaries of £5.5m (2022: £5.0m).
The Group's net cash balance (comprising cash and cash equivalents, less
overdrafts and borrowings) at 1 April 2023 was £0.7m (2022: £25.7m). Net
cash comprises cash balances of £6.8m (2022: £25.7m) less bank borrowings of
£6.1m (2022: £nil), excluding loans from related parties and non-controlling
interests of £5.5m (2022: £5.0m) Net cash also excludes lease liabilities of
£55.3m (2022: £63.7m) which are not considered to be core borrowings.
Since the period end the Group has extended its RCF with HSBC until September
2027, with unchanged banking covenants. The £15.0m RCF is secured and
covenants are tested on a quarterly basis and contain a net debt to EBITDA
ratio and a fixed charge cover ratio. Covenants are tested on a "frozen GAAP"
basis and exclude the impact of IFRS16 and SaaS costs. In addition, the Group
has a £4.0m overdraft facility and a further USD 1.9m overdraft facility in
China, which are renewed annually.
Corporate Social Responsibility - Made To Last
In 2021, we celebrated 50 years of Mulberry. As part of the celebrations, we
launched our Made to Last Manifesto. It's a commitment to responsible
innovation and a philosophy that goes to the very heart of what we do in every
part of the business. From sourcing and manufacturing, to our relationships
with the communities around us, we continue to strive for the best sustainable
practices.
Our sustainability strategy
Made to Last is also the name given to our business sustainability strategy.
It's evolved from our previous policies and practices that aimed for a
responsible and sustainable future. It focuses on the following key pillars:
1. Net Zero Future - the very centre of our strategy, aiming for net
zero carbon emissions by 2035.
2. Regenerative Sourcing - we will source all materials responsibly,
trial and introduce material innovations and transform to a regenerative
business model.
3. Net Zero Manufacturing - we will measure our impact so we can
protect the environment and the livelihoods within our supply chain.
4. Product Circularity - we will strengthen our offers that aim for a
fully circular product lifecycle, to reduce waste and encourage sustainable
consumption.
5. Inclusive Communities - we will positively impact our communities
and work for a more diverse, equitable and inclusive future.
A summary follows here and you can read further detail in our stand-alone Sustainability Report available on the Responsibility pages of Mulberry.com;
https://www.mulberry.com/row/madetolast/responsibility.
1. Net Zero Future
Baseline Carbon Footprint: During 2021, we worked with the Carbon Trust to
measure our global carbon footprint across Scopes 1, 2 and 3, using FY2019-20
as a baseline. Scope 1 relates to emissions from operations in our direct
control, while Scope 2 is indirect emissions from energy purchased. Scope 3
relates to indirect emissions from the value chain not in our control and not
included in Scope 2, such as in raw materials and business travel.
Results showed that just 7% of our emissions related to Scope 1 and 2 and 93%
of our emissions occur in Scope 3. We are now working on an update to our
global carbon footprint for 2023, which will serve as an update to our 2020
footprint.
UK Carbon Footprint: in line with SECR requirements we have carried out a UK
carbon footprint calculation. We continue to offset the carbon emissions
associated with out UK carbon footprint in partnership with World Land Trust,
investing in their Carbon Balanced programme.
Scope 1 and 2
We have already made some progress addressing these by installing:
· solar panels on the roof of The Willows factory
· LED lighting fixtures with light and motion sensors, in factory,
warehouse and office sites
· LED lighting in 33% of our store network
· electric vehicle charging points at The Rookery.
Since 2019, we have offset our UK Scope 1 and 2 carbon footprint through World
Land Trust's Carbon Balanced programme.
The split of our emissions is as follows:
Stores 33%
Factories 32%
Offices 20%
Warehousing 11%
Vehicles 4%
Scope 3
It's more difficult to access data further down the supply chain, making it
essential to collaborate with suppliers to reduce our carbon emissions.
To begin with, we are addressing our Scope 3 emissions by:
· surveying our Tier 1 and 2 product suppliers regularly to better
understand their environmental practices
· setting targets for our retail stores to increase their recycling
rate
· introducing a hybrid-working policy for employees, to reduce
commuting emissions
· updating our travel policy to promote more financially and
environmentally sustainable travel behaviour.
Science-based targets
We have developed science-based targets with the Carbon Trust and submitted
them February 2023 for approval by the Science-Based Target initiative (SBTi).
The targets show companies how much and how quickly they need to reduce their
greenhouse-gas emissions to prevent the worst effects of climate change. They
are aligned to the most recent climate science, which currently advises
limiting global warming to less than 1.5 °C. We expect to have our targets
assessed by SBTi in October 2023.
2. Regenerative Sourcing
Sustainable leather
Leather goods are the foundation of our business and comprise over 90% of our
collection. We source finished leather directly from tanneries in the UK,
Italy, Germany, Spain and Turkey. In 2020, we joined the Sustainable Leather
Foundation (SLF) as a founding partner. As well as assessing a leather
manufacturer's environmental credibility, SLF reviews their social performance
and governance, offering us a holistic view of sustainability matters. We aim
to source all our leather from accredited sources by 2023, by which we mean
tanneries with a valid Leather Working Group audit, Sustainable Leather
Foundation audit or ISO:14001 accreditation.
In November, we launched our first 'farm to finished product' bags, in
collaboration with Scottish tannery, Muirhead, a member of Scottish Leather
Group, which make the world's lowest-carbon-intensity leather, at 1.1kg of CO2
per hide.
We continue to invest in establishing and growing this approach by working
with organisations including the Leather Working Group and the Sustainable
Leather Foundation, who support best practice in animal welfare, traceability
and environmental management.
Material innovation
We source a variety of fabrics, materials and other components to create our
collections and look to ensure their credentials align with our low-impact
materials strategy. Our approach so far has been to make rolling changes to
our conventional materials, such as cotton, as we develop each seasonal range,
to improve its sustainability credentials.
Sourcing transparency
Our international supply chain is based on sourcing quality raw materials and
finished products which meet our quality and environmental expectations.
Alongside our UK manufacturing facilities, we source from a select Group of
long-standing partners in Italy, Turkey, China and Vietnam. We work with
countries that have established skills and heritage within the leather
industry and that can support our high-quality standards and progressive
new-product-development programmes.
All our suppliers have signed up to our Global Sourcing Principles, which set
out our minimum requirements for conducting business, including those of
international law such as the ILO's four fundamental principles for rights at
work: no child labour, no forced labour, no discrimination and the right to
freedom of association and collective bargaining.
For Mulberry products arriving at our warehouses in the period, 40% were
sourced from suppliers we've worked with for more than ten years and 60% from
suppliers we've worked with for more than five years.
3. Net Zero Manufacturing
Made in the UK
Our presence in the south-west of England harks back to our beginnings in
1971. The Rookery opened in Chilcompton in 1989 and is our centre of
excellence for product development and home to our development team, artisan
studio and Lifetime Service Centre. Our second UK factory, The Willows, opened
in Bridgwater in 2013 and is our main production site in the UK, housing seven
production lines. At The Willows and The Rookery, we employ more than 350
people. Craftspeople joining follow a comprehensive training programme that
equips them with the skills needed to craft Mulberry bags, whether that's
cutting leather, edge inking, stitching or quality inspection.
Both The Rookery and The Willows have been carbon-neutral since 2019 and we
generate a portion of the electricity for The Willows from solar panels on the
roof. Both sites work with partners who ensure no unrecyclable waste goes to
landfill and is recovered as energy instead. The cutting machines we use
minimise our cutting waste and we donate any unusable leather offcuts to local
craft Groups, schools and scrap stores. We regularly host educational tours
for colleges and university classes.
Water and chemical management
Our manufacturing chain requires tanning agents, adhesives and cleaning
products. We ensure our suppliers follow strict chemical-management practices
and also maintain our own restricted-substance list set to the strictest legal
limits in the markets where we sell our products.
We used World Wildlife Fund's Water Risk Filter to map our water consumption
and risk for both our UK factories. Currently we are classed as low risk. To
help us remain at this level, we use a rainwater harvesting tank at The
Rookery for toilet flushing.
4. Product Circularity
The Mulberry Exchange
We create Mulberry bags to last a lifetime and be handed down to the next
generation. However, we also believe a change or exchange can be positive. We
launched The Mulberry Exchange in 2020 to restore Mulberry classics
authentically for a new owner, while giving customers the chance to return
their pre-loved bags in exchange for credit towards a new purchase.
We sell the restored bags in stores and online and were one of the first
brands to use re-sale platform Vestiaire Collective, which showcases and sells
second-hand limited-edition and rare pieces.
Repairs and restoration
The team at the Lifetime Service Centre at The Rookery are masters of
restoration, breathing new life into thousands of pre-loved Mulberry items
every year. If an item is beyond repair, we will offer to buy it back and
reclaim the energy through Scottish Leather Group, who have a thermal
energy-reclamation plant.
Waste and recycling
In the UK, we work with providers such as Biffa and First Mile to process any
non-recyclable waste that would traditionally go to landfill, to create
electricity for the National Grid. We send our mixed recycling for sorting so
it can be reprocessed into new products.
We have a zero-tolerance policy on destroying quality goods. We divert unsold
seasonal stock to our global network of outlet stores and also hold an annual
employee sale of samples and stock, with proceeds added to our Somerset
Community Fund, or other charitable causes.
We create our green carrier bags from cupcycling, an innovative technology
that repurposes coffee cups into paper, while also separating the cups'
plastic lining for recycling. Since we started, we have repurposed over 2.8
million coffee cups that would otherwise have been sent to landfill.
All our customer-facing packaging will be recyclable by the end of 2022. We
are also working to reduce the amount of cardboard we use for packaging and to
eliminate all plastic from our business-to-business operations. In addition,
we are currently in the process of changing our ribbon and handles for our
carrier bags to a material that will be compostable and biodegradable.
5. Inclusive Communities
Culture and wellbeing
All our employees are ambassadors for Mulberry and we encourage them to live
our employee values, which we believe help foster a culture of wellbeing and
acceptance, where everyone is celebrated for their individuality. In our
culture and environment, all employees can thrive, irrespective of their
gender identity, sexual orientation, marital and civil partnership status,
parental status, race or ethnicity, religion or religious belief, political
opinion, physical appearance, age or disability. All our employees can access
our intranet - The Tree - where we post company information, updates and
employee achievements and encourage communication.
Diversity, equity and inclusion
To ensure we are successful in creating this environment for our employees,
our Diversity, Equity and Inclusion (DE&I) Committee meets regularly to
discuss our DE&I Strategy, as well as current news, personal experiences
and those of our colleagues. The committee also works with the marketing
department to create a communications calendar, recognising key moments such
as International Women's Day, Mental Health awareness, Pride and Black History
Month. This helps us reflect on and celebrate the success of our diverse
employees.
Gender equality
Since the publication of our last Gender Pay Gap Report, we have seen notable
improvement in both our median and mean hourly pay gap. Comparing our gender
pay gap results with industry data we see that our median results are
significantly better than the Office for National Statistics (ONS)
benchmark. Mulberry's median hourly pay gap is in favour of women at -5.2%
compared to ONS benchmark at 8.3% in favour of men.
Our Management Board and Senior Leadership Team is weighted towards women.
Living Wage Employer
We are proud to be an accredited Living Wage Employer. This means that all UK
employees will earn higher than the Government's minimum or National Living
Wage. Living Wage is an independently calculated hourly pay rate based on
the actual cost of living, calculated each year by the Living Wage
Foundation. We continue to use available global benchmarks and insights to
ensure our global employees earn a living wage comparable with their location.
Apprenticeships
Since 2006, we have operated a leather goods manufacturing apprenticeship
programme in conjunction with Bridgwater and Taunton College, which we run at
The Willows and The Rookery.
In 2017, we were Lead Employer in a national trailblazer Group, developing the
Level 2 Leather Craftsperson Standard apprenticeship, which has since become
industry-recognised, offering graded results for apprentices in the leather
goods' industries.
Our Leather Goods Manufacturing apprenticeship programme continues to support
the upskilling of workers into the leather goods industry and in the period
saw us employ 4 new apprentices into the scheme. The programme has been
reinvigorated to encourage cross functional learning across several
departments within Mulberry, expanding the apprentices experience and
providing more exposure to the business.
Our progress so far
Leather
· For the Spring Summer 23 season, all of our leather, suede and
nappa is sourced from tanneries with environmental accreditations (Autumn
Winter 22: 88%)
· Over 5 years, we worked with our tannery partners whilst they
improved their environmental standards and achieved certification, stimulating
positive change within the leather industry - as well as onboarding new
tanneries with existing certificates
· We are a founding partner of the Sustainable Leather Foundation
and members of Leather Working Group since 2012
Link to theme 2
Other low-impact materials
· All nylon sourced as 100%-certified recycled nylon or ECONYL
since Spring 2020
· Launch of our Softie outerwear capsule in September 2022, using
recycled silk padding and recycled nylon outer
· Continue to represent low impact materials throughout our
collections, including ECONYL, bio-acetate and Eco-Scotchgrain
Link to theme 2
Carbon
· All UK operations carbon-neutral since 2019. This is achieved by
supporting World Land Trust's Carbon Balanced programme which empowers local
communities while tackling climate change and biodiversity loss
· Signatory of UN Fashion Industry Charter for Climate Action
· In February 2023 we submitted our carbon reduction targets to the
Science Based Targets (SBTi)
Link to theme 1, 3
Product circularity
· Launched circular resell and buy-back programme, The Mulberry
Exchange, in February 2020
· Launched on Vestiaire Collective's Brand Approved programme in
March 2021
· Launched on London based rental platform HURR in June 2022
· Lifetime Service Centre restored over 12,000 bags in FY 2022-23
Link to theme 4
Packaging
· Cupcycling introduced into customer packaging in January 2020,
repurposing over 3.2 million coffee cups to make Mulberry Green paper
· All our paper and card is FSC certified
Link to theme 4
People and community
· We grant all employees two days of paid volunteering each year
· We have raised £18,906 in the period for The Felix Project and
their Empty Plate Emergency Appeal. This equates to 81,432 meals.
· Ongoing partnership with World Land Trust, our environmental
charity partner
· In September 2021, we began a long-term partnership and set up a
charitable fund with Somerset Community Foundation to help people in Somerset
through funding local charities, Groups and communities, inspiring giving and
philanthropy
· Mulberry donated £50,000 to the Red Cross Ukraine Appeal, as
well as match-funding various employee led fundraising activities
· In February 2023 Mulberry made a £20,000 donation to the British
Red Cross to assist the earthquake relief efforts in Turkey and Syria
· We continue to manufacture over half of our bags in the UK and
invest in our thriving apprenticeship programme and Next Generation retail
concept.
Link to theme 5
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 going concern period reviews the 12-month period from
the date of this announcement to end of June 2024.
Whilst the Directors have not identified a material uncertainty in respect of
going concern, there were significant judgements applied in reaching this
conclusion. The key judgements made in the going concern assessment are in
relation to the more challenging trading environment due to macro-economic
uncertainty, along with ongoing disruption in key markets, as demonstrated
with the recent lockdowns in China. The Directors considered the outlook for
the Group against their detailed base case scenario. The Directors have also
considered a reverse stress test scenario and compared this to a reasonable
worse case downside scenario. These are described in further detail below.
The Group had net cash of £0.7m (2022: £25.7m) at 1 April 2023 which
included a £4.0m drawdown on its revolving credit facility (RCF).
Borrowing facilities
The Group has a £15.0m RCF with security granted in favour of HSBC banking,
which has been extended for a further four-year period to 30 September 2027.
Covenants are tested on a quarterly basis and contain a net debt to EBITDA
ratio and a fixed charge cover ratio. Covenants are tested on a 'frozen GAAP'
basis and exclude the impact of IFRS 16 and SaaS costs. In addition, the
Group has a £4.0m overdraft facility and a further USD1.9m overdraft facility
in China which is currently capped at USD0.5m, which are not committed
facilities and therefore not considered by the Directors as part of the going
concern assessment. The Group overdraft is renewed annually and the overdraft
in China is renewed annually in July.
The RCF was drawn down by £4.0m at the period end and this increased to
£12.0m at the date of this report. The Group had net debt of £8.8m at 23
June 2023.
Base case scenario
The Directors' base case scenario assumes that revenue will increase by 10.8%
versus 2022/23 with growth primarily driven by the full year impact of 2022/23
initiatives of Sweden and Australia. Caution has been applied on the UK and
China markets reflecting a level of uncertainty. The Directors compared the
base case scenario against external analysis which supported our strategic
approach and growth plans, including market opportunities.
The budget includes cost increases relating to inflationary cost pressure and
to support system transformation projects to drive efficiencies and improve
conversion, as well as investment behind strategic growth initiatives.
Under this scenario, banking covenants will be met however it is anticipated
an element of the RCF will continue to be required between April 2023 and June
2023.
Reverse stress test and downside scenario
The Directors have considered a plausible but remote downside scenario, which
models out the risk in the UK and South Korea, which are considered the main
regions which could impact full-year revenue. The impact of this would result
in a 5.5% reduction in Group revenue against the base case scenario and
further mitigating actions are available.
The Directors have prepared a reverse stress test scenario that models the
decline in sales that the Group would be able to absorb before triggering a
breach of banking covenants. It should be noted that the RCF is not forecast
to be fully drawn down under the reverse stress test. The Directors believe
that this scenario is remote, for the following reasons:
· Current trading is outperforming the reverse stress assumptions.
This is anticipated to continue;
· Revenue in this scenario would be below the level achieved in
2022/23, with current trading above last year;
· Despite the fall in revenue in this scenario, the RCF would not
be fully drawn although available to the Group throughout the going concern
period; and
· If trading was to be challenging over the key trading periods,
there is time to react and take further mitigating actions before the covenant
is breached in June 2024, including further discretionary cost savings and an
increase in mark-down sales to clear stock. We retain a good working
relationship with our bankers, HSBC and would look for a relaxation of bank
covenants.
The reverse stress test shows that Group revenue could fall by 14.0% versus
the base case scenario before the leverage covenant is breached in June 2024.
However once mitigating actions are applied this increases to 17.2%.
Under this scenario, the RCF is not fully drawn so would still be available to
the Group throughout the 12-month going concern period, however, the leverage
covenant would be breached in June 2024. Whilst the Directors believe that
this scenario is remote, it would allow time for further actions to be taken,
including a possible further relaxation of banking covenants. Whilst there
is no guarantee that this will be agreed, the Group currently maintains a good
relationship with our bankers, HSBC.
Going concern basis
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 Annual Report and
financial statements.
Group income statement
52 WEEKS ENDED 1 APRIL 2023
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Revenue 159,129 152,411
Cost of sales (45,879) (43,106)
Gross profit 113,250 109,305
Impairment charge relating to intangibles (2,366) -
Impairment credit relating to property, plant and equipment 850 -
Impairment credit relating to right-of-use assets 12,949 -
Other operating expenses (108,485) (85,878)
Other operating income 776 1,220
Operating profit 16,974 24,647
Share of results of associates 52 127
Finance income 11 19
Finance expense (3,887) (3,467)
Profit before tax 13,150 21,326
Tax (1,753) (2,157)
Profit for the period 11,397 19,169
Attributable to:
Equity holders of the parent 13,243 19,985
Non-controlling interests (1,846) (816)
Profit for the period 11,397 19,169
Basic profit per share 19.1p 32.2p
Diluted profit per share 19.1p 32.2p
All activities arise from continuing operations.
Group statement of comprehensive income
52 WEEKS ENDED 1 APRIL 2023
52 weeks 53 weeks ended
ended 2 April
1 April 2022
2023 £'000
£'000
Profit for the period 11,397 19,169
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (483) (116)
Total comprehensive income for the period 10,914 19,053
Attributable to:
Equity holders of the parent 12,888 19,954
Non-controlling interests (1,974) (901)
Total comprehensive income for the period 10,914 19,053
Group balance sheet
AS AT 1 APRIL 2023
1 April 2 April
2023 2022
£'000 £'000
Non-current assets
Intangible assets 6,015 6,056
Property, plant and equipment 19,817 14,618
Right-of-use assets 57,520 32,221
Interests in associates 254 335
Deferred tax asset 622 2,148
84,228 55,378
Current assets
Inventories 48,250 36,783
Trade and other receivables 19,901 15,927
Cash and cash equivalents 6,872 25,669
75,023 78,379
Total assets 159,251 133,757
Current liabilities
Trade and other (28,143) (24,975)
payables
Current tax liability (182) (2,382)
Lease liabilities (10,932) (11,108)
Borrowings (11,562) (3,278)
(50,819) (41,743)
Net current assets 24,204 36,636
Non-current liabilities
Lease liabilities (61,666) (52,547)
Borrowings - (1,721)
(61,666) (54,268)
Total liabilities (112,485) (96,011)
Net assets 46,766 37,746
Equity
Share capital 3,004 3,004
Share premium account 12,160 12,160
Own share reserve (896) (1,269)
Capital redemption reserve 154 154
Foreign exchange reserve 675 1,158
Retained earnings 38,110 27,006
Equity attributable to holders of the parent 53,207 42,213
Non-controlling interests (6,441) (4,467)
Total equity 46,766 37,746
The financial statements of Mulberry Group plc (company number 01180514) were
approved by the Board of Directors and authorised for issue on 27 June 2023.
They were signed on its behalf by:
Thierry
Andretta
Charles Anderson
Director
Director
Group statement of changes in equity
52 WEEKS ENDED 1 APRIL 2023
Share Share premium account Own share reserve Capital redemption reserve Foreign exchange reserve Retained earnings Total Non-controlling interests Total
capital £'000 £'000 £'000 £'000 £'000 £'000 £'000 equity
£'000 £'000
Balance 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 - - - - - 19,985 19,985 (816) 19,169
Other comprehensive expense for the period - - - - (116) - (116) - (116)
Total comprehensive (expense)/income for the period - - - - (116) 19,985 19,869 (816) 19,053
Charge for employee share-based payments - - - - - 69 69 - 69
Own shares - - 8 - - - 8 - 8
Exercise of share options - - - - - (5) (5) - (5)
Non-controlling interest foreign exchange - - - - - - - (85) (85)
Balance at 2 April 2022 3,004 12,160 (1,269) 154 1,158 27,006 42,213 (4,467) 37,746
Profit/(loss) for the period - - - - - 13,243 13,243 (1,846) 11,397
Other comprehensive expense for the period - - -- - (483) - (483) - (483)
Total comprehensive (expense)/income for the period - - -- - (483) 13,243 12,760 (1,846) 10,914
Charge for employee share-based payments - - - - - 23 23 - 23
Own shares - - 346 - - - 346 - 346
Exercise of share options - - - - - (346) (346) - (346)
Impairment of shares in trust - - 27 - - (27) - - -
Non-controlling interest foreign exchange - - - - - - - (128) (128)
Dividends paid - - - - - (1,789) (1,789) - (1,789)
Balance at 1 April 2023 3,004 12,160 (896) 154 675 38,110 53,207 (6,441) 46,766
Group cash flow statement
52 WEEKS ENDED 1 APRIL 2023
52 weeks ended 53 weeks ended
1 April 2 April 2022
2023 £'000
£'000
Operating profit for the period 16,974 24,647
Adjustments for:
Depreciation and impairment of property, plant and equipment 3,487 3,702
Depreciation and impairment of right-of-use assets (5,021) 6,682
Amortisation and impairment of intangible assets 4,041 1,778
Gain on lease modification and lease disposals (441) (2,160)
Loss on sale of property, plant and equipment 96 38
Business combination gain (304) -
Profit on disposal of intangible assets - (5,343)
Own shares transferred from trust - 8
Share-based payments expense 23 69
Operating cash inflows 18,855 29,421
before movements in working capital
Increase in inventories (9,722) (5,400)
Increase in receivables (3,974) (3,318)
Increase in payables 2,001 2,136
Cash generated from operations 7,160 22,839
Income taxes paid (2,427) (154)
Interest paid (3,899) (3,470)
Net cash inflow from operating activities 834 19,215
Investing activities:
Interest received 15 19
Acquisition of businesses (3,182) -
Purchases of property, plant and equipment (7,129) (4,419)
Proceeds from disposal of property, plant and equipment 2 59
Acquisition of intangible assets (3,919) (897)
Dividend received from associate 40
Proceeds from disposal of intangible assets - 13,316
Net cash (used in)/ generated from investing activities (14,173) 8,078
Financing activities:
Increase in loans from non-controlling interests 246 313
New borrowings 6,100 -
Dividends paid (1,789) -
Principle elements of lease payments (10,261) (13,736)
Settlement of share awards - (5)
Net cash used in financing activities (5,704) (13,428)
Net (decrease)/increase in cash and cash equivalents (19,043) 13,865
Cash and cash equivalents at beginning of period 25,669 11,820
Effect of foreign exchange rate changes 246 (16)
Cash and cash equivalents at end of period 6,872 25,669
Cash and cash equivalents comprise cash and short-term bank deposits with an
original maturity of three months or less. The carrying amount of these assets
at the end of the reporting period as shown in the consolidated statement of
cash flows can be reconciled to the related items in the Consolidated balance
sheet position as shown above. Cash and cash equivalents does not include bank
overdrafts that are not integral to the cash management of the Group.
1. GENERAL INFORMATION
Mulberry Group plc is a public company, limited by shares, incorporated in the
United Kingdom under the Companies Act 2006 and is registered in England and
Wales.
These financial statements are presented in pounds Sterling because that is
the currency of the primary economic environment in which the Group operates.
2. ADOPTION OF NEW AND REVISED STANDARDS
New and amended standards adopted by the Group
In the current period, the Group has applied a number of amendments to IFRS
Standards issued by the International Accounting Standards Board (IASB) that
are mandatorily effective for an accounting period that begins on or after 1
January 2023. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial statements.
At the date of approval of these financial statements, the Group has not
applied any new and revised IFRS Standards that have been issued but are not
yet effective.
The Directors do not expect that the adoption any Standards which have been
issued but not yet effective to have a material impact on the financial
statements of the Group in future periods.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006.
For the period ended 1 April 2023, the financial period runs for the 52 weeks
to 1 April 2023 (2022: 53 weeks ended 2 April 2022).
The financial statements are prepared under the historical cost basis except
for financial instruments that are measured at fair values at the end of each
reporting period as explained in the accounting policies below. The principal
accounting policies adopted are set out below.
Going concern
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. As a result,
they continue to adopt the going concern basis of accounting in preparing the
financial statements.
4. 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
The Group continues to extend 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. It is
therefore appropriate for the segmental analysis disclosures to be a 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.
The principal activities are as follows:
The accounting policies of the reportable segments 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).
The Group designs, manufactures and manages the Mulberry brand for the segment
and therefore the finance income and expense are not attributable to the
reportable segments.
Group income statement
52 weeks ended 1 April 2023
UK Asia Pacific Other International Eliminations Total
£'000 £'000 £'000 £'000 £'000
Revenue
Omni-Channel 171,615 27,234 13,073 (77,677) 134,245
Wholesale 4,918 4,254 15,712 24,884
Total revenue 176,533 31,488 28,785 (77,677) 159,129
Segment profit/(loss) 533 (1,222) 12,398 11,709
Central costs (5,374)
Store closure credit 205
Impairment of property, plant and equipment 850
Impairment of right-of-use assets 12,949
Impairment of intangible (2,366)
Australia acquisition costs (806)
Sweden acquisition costs (193)
Operating profit 16,974
Share of results of associates 52
Finance income 11
Finance expense (3,887)
Profit before tax 13,150
UK Asia Pacific Other International Central Total
£'000 £'000 £'000 £'000 £'000
Segment capital expenditure 7,866 1,101 1,731 138 10,836
Segment depreciation and amortisation net of impairment (6,142) 4,942 1,747 1,960 2,507
Segment assets 108,065 27,812 14,539 8,213 158,629
Segment liabilities 72,006 16,312 13,877 10,290 112,485
Group income statement
53 weeks ended 2 April 2022
UK Asia Pacific Other International Eliminations Total
£'000 £'000 £'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
UK Asia Pacific Other International Central Total
£'000 £'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 61,660 8,221 13,597 12,511 95,989
For the purposes of monitoring the segment performance and allocating
resources 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 over 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.
5. ALTERNATIVE PERFORMANCE MEASURES
A reconciliation of reported profit before tax to underlying profit before tax
is set out below;
Reconciliation to underlying profit before tax: 52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Profit before tax 13,150 21,326
Store closure credit (205) (6,757)
Impairment credit related to property, plant and equipment (850) -
Impairment credit related to right-of-use assets (12,949) -
Impairment charge related to intangibles 2,366 -
Australia acquisition costs 806 -
Sweden acquisition costs 193 -
Underlying profit before tax - non-GAAP measure 2,511 14,569
Adjusted basic earnings per share 5.8p 24.8p
Adjusted diluted earnings per share 5.8p 24.8p
In reporting financial information, the Group presents Alternative Performance
Measures ("APMs"), which are not defined or specified under the requirements
of IFRS. The Group believes that these APMs, which are not considered to be a
substitute for, or superior to, IFRS measures, provide stakeholders with
additional helpful information on the performance of the business. These APMs
are consistent with how the business performance is planned and reported
within the internal management reporting to the Board of Directors. Some of
these measures are 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 APMs. 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.
Store closure costs
During the period, one UK and one international store were closed (2022: two
UK and two international stores). The stores closure credit relates to the
following items (released)/charged to the Income Statement :-
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Release of lease liabilities (635) (1,323)
Profit on disposal of an intangible asset - (5,343)
Lease exit and redundancy costs 430 (91)
(205) (6,757)
The disposal of the leases resulted in net cash proceeds of £nil
(2022:13,300,000).
Impairment charge related to property, plant and equipment and right-of-use
assets;
The fixed assets and right-of-use assets of retail stores are subject to
impairment based on whether current or future events and conditions suggest
that their recoverable amount may be less than their carrying value. The
recoverable amount of each store is based on the higher of the value in use
and fair value less costs to dispose. Value in use is calculated from expected
future cash flows using suitable discount rates, management assumptions and
estimates on future performance. The carrying value for each store is
considered net of the carrying value of any cash contribution received in
relation to that store. For impairment testing purposes, the Group has
determined that each store is a separate cash-generating unit (CGU). Each CGU
is tested for impairment if any indicators of impairment have been identified.
The value in use of each CGU is calculated based on the Group's latest budget
and forecast cash flows. Cash flows are discounted using the weighted average
cost of capital ("WACC") and are modelled for each store through to their
lease expiry or break date. No lease extensions have been assumed when
forecasting. The Group also tests whether there should be any reversal of
previously impaired assets. The results of this assessment are shown in the
table below :-
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Impairment charge related to property, plant and equipment - 1 store (2022: 204 -
nil)
Reversal of impairment charge related to property, plant and equipment - 1 (1,054) -
store (2022: nil)
Net impairment credit related to property, plant and equipment (850) -
Impairment charge related to right-of-use assets - 2 stores (2022: nil) 773 -
Reversal of impairment charge related to right-of-use assets - 2 stores (2022: (13,722) -
nil) ((1))
(12,949) -
(1) Included within the impairment reversal credit is £7,845,000 for Bond
Street which was closed during the period. On 3 April 2023 the lease on this
store was assigned to a third party. Based on the future discounted cash flow
savings that will benefit the Group over the remaining life of the lease the
Directors have determined that the fair value less costs to sell of the store
right-of-use asset at 1 April 2023 was higher than its carrying value and
therefore it was appropriate to reverse £7,845,000 of previously charged
impairment. The balance relates to a reversal of a previous impairment of our
Regent Street store. This store has seen improved performance post the Bond
Street closure, which we anticipate to continue.
Impairment charge related to intangibles
Goodwill represents the opportunity to grow by utilising an established
distribution network in Korea. The recoverable amount of the goodwill is
determined based on a value in use calculation which uses cash flow
projections based on financial projections approved by the Directors and using
a pre-tax discount rate of 22.3% per annum (2022: 18.4%). Acquired goodwill is
regarded as having an indefinite life and under IAS36 is not subject to
amortisation but is subject to annual tests for impairment. As a result of
this assessment the Group incurred an impairment charge during the period of
£2,366,000 (2022: £nil).
Australia acquisition costs
During the period the Group incurred costs of £806,000 (net of a business
combination gain of £304,000) on the acquisition of 5 stores in Australia.
Sweden acquisition costs
During the period the Group incurred costs of £193,000 on the acquisition of
3 stores in Sweden.
6. OTHER OPERATING EXPENSES
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Other operating expenses have been arrived at after charging/(crediting):
Impairment of intangible assets 2,366 -
Impairment of property, plant and equipment (850) -
Impairment of right-of-use assets (12,949) -
Amortisation of intangible assets 1,675 1,778
Depreciation of property, plant and equipment 4,337 3,702
Depreciation of right-of-use assets 7,928 6,682
Net foreign exchange gain (158) (57)
Store closure credit (205) (6,757)
Staff costs 44,991 40,731
Other operating expenses 49,917 39,799
108,485 85,878
7. EARNINGS PER SHARE ('EPS')
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
pence pence
Basic earnings per share 19.1 32.2
Diluted earnings per share 19.1 32.2
Underlying basic earnings per share 5.8 24.8
Underlying diluted earnings per share 5.8 24.8
Earnings per share is calculated based on the following data:
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
£'000 £'000
Profit for the period for basic and diluted earnings per share 11,397 19,169
Adjusting items:
Store closure credits* (203) (4,411)
Reversal of impairment charge related to property, plant and equipment* (650) -
Reversal of impairment charge related to right-of-use assets* (10,342) -
Impairment charge for intangible assets 2,366
Australia acquisition costs* 728 -
Sweden acquisition costs 193 -
Profit for the period for underlying basic and diluted earnings per share 3,489 14,758
* These items are included net of £2,731,000 (2022: £2,346,000) of the
corresponding tax expense.
52 weeks ended 53 weeks ended
1 April 2 April
2023 2022
Million Million
Weighted average number of ordinary shares for the purpose of basic EPS 59.6 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
The weighted average number of ordinary shares in issue during the period
excludes those held by the Mulberry Group plc Employee Share Trust.
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