REG - Mulberry Group PLC - Half-year Report
24/11/2021 07:00
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RNS Number : 3310T Mulberry Group PLC 24 November 2021
Mulberry Group plc
Results for the twenty-six weeks ended 25 September 2021
Further strategic progress amid strong consumer demand
Mulberry Group plc (the "Group" or "Mulberry"), the British sustainable luxury
brand, announces unaudited results for the twenty-six weeks ended 25 September
2021 (the "period").
THIERRY ANDRETTA, CHIEF EXECUTIVE OFFICER, COMMENTED:
"I am proud of Mulberry's performance during the period. Our long-term
strategy, namely our innovative and sustainable products made in our carbon
neutral Somerset factories, our market-leading omni-channel distribution
model, and our expansion into Asia Pacific, has delivered a strong financial
performance.
"Product innovation and sustainability are central to our strategy,
demonstrated by the recent launch of our "The Lowest Carbon collection",
further supporting the commitments we made in our Made to Last manifesto and
our goal to reach zero carbon emissions by 2035.
"The bold decisions we have taken with regards to focussing on our UK
production capabilities, means that we are well placed for the festive trading
period and beyond. Finally, I would like to take this opportunity to thank my
colleagues for their hard work, commitment and achievement over the period."
Financial Highlights
· Group revenue increased 34% to £65.7m (2020: £48.9m)
· Profit before tax of £10.2m (2020: loss before tax £2.4m)
includes a one-off profit on disposal of Paris lease of £5.7m
· Gross margin of 69% (2020: 59%) due to a strategic focus on
full-price sales and increased volume efficiencies
· UK retail sales increased 36% to £38.0m (2020: £28.0m)
· China retail sales increased 38%, which contributed to the 23%
increase in Asia Pacific retail sales to £11.8m (2020: £9.5m), reflecting
ongoing investment in the region
· US retail sales increased 57% to £3.3m (2020: £2.1m)
· International retail sales represented 40% of Group revenue
(2020: 41%)
· Franchise and wholesale sales increased 67% to £10.1m (2020:
£6.0m)
· Strong period end net cash of £30.3m (2020: £8.6m) and deferred
liabilities of £5.0m (2020: £4.6m)
Operating Highlights
· Business and infrastructure responded well to increased demand
following easing of COVID-19 restrictions
· Digital sales 29% of Group revenue in the period, lower than last
year when stores were closed but up from 20% (H1 2019), reflecting the ongoing
strength of this channel
Sustainability Highlights
· Launched on 22 November 2021, "The Lowest Carbon collection",
crafted from the world's lowest carbon leather and using a local and
transparent supply chain. This is Mulberry's first capsule collection of
regenerative "farm to finished product", further supporting our Made to Last
manifesto
· Continue to focus on embedding sustainability and circularity
across the entire business, following the launch of the Made to Last manifesto
in April 2021
· Successful launch of our resale programme "Preloved Bags", across
all channels
· Further investment in the Lifetime Service Centre at The Rookery
which is now restoring more than 10,000 bags a year
· Committed to set Science Based Targets aligned with our 2035 Net
Zero emissions target
· 86% of the collection now uses leather and suede sourced from
environmentally accredited tanneries; on track to increase to 100% by
Autumn/Winter 2022. All other non-leather materials are fully sustainable
· Collaborations with contemporary British Designers emphasising
sustainable techniques and materials
Current Trading
· Retail revenue in the 8 weeks to 20 November 2021 increased 35%
compared to the same period last year
· Gross margin in the second half is expected to be similar to, or
slightly higher than, the 67% achieved in the second half of last year
· The Group is expected to continue generating cash from operations
in the second half and, with its deferred liabilities expected to unwind, the
Group will maintain a strong cash position at the year end
FOR FURTHER DETAILS PLEASE CONTACT:
Mulberry
Charles Anderson
Tel: +44 (0) 20 7605 6793
Headland (Public Relations)
Lucy Legh / KIRSTY CARRUTHERS
Tel: +44 (0) 20 3805 4822
mulberry@headlandconsultancy.com
GCA Altium Limited (FINANCIAL ADVISER AND NOMAD)
Tim Richardson
Tel: +44 (0) 20 7484 4040
OVERVIEW
The Group has delivered a strong performance. Group revenue increased by 34%,
returning to pre-COVID-19 levels and profit before tax was £10.2m (2020: loss
of £2.4m), which included a profit of £5.7m on the lease in Paris. The
underlying profit before tax of £4.5m (2020: loss before tax of £1.9m) and
financial strength of the Group reflects the benefits of the actions we took
during the pandemic and a strong consumer reaction to the Group's product.
Sales in the UK recovered strongly once our stores re-opened. The sales lost
from the absence of tourists in the UK and the rationalisation of stores in
Europe were replaced by strong growth in Asia.
Gross margin increased to 69% (2020: 59%) driven by a strategic focus on
full-price sales and increased volume efficiencies.
The combination of our UK factories, careful planning and agile supply chains
has enabled us to successfully navigate the well-publicised difficulties in
global logistics, with no impact on fulfilment to our sales channels.
We ended the period with net cash of £30.3m (2020: £8.6m) and deferred
liabilities of £5.0m (2020: £4.6m).
Looking ahead, our mission continues to be focused on becoming the leading
responsible British luxury brand and a pioneer in sustainability. Through our
Made to Last manifesto, launched in April, we are committed to transform our
business to be a regenerative and circular model that will encompass the
entire supply chain, from field to wardrobe by 2030. We believe the
opportunity is substantial and we have taken a progressive leadership position
in this space, investing in products that are made to last, and offering
customers circular repair and buy back options through the Mulberry Exchange.
Mulberry's results demonstrate the continued relevance and popularity of the
brand and show ongoing progress against both financial and operational goals.
CURRENT TRADING AND OUTLOOK
The underlying sales trends experienced in the first half continued into
October and November with improving store sales, a strong digital performance
and continuing growth in Asia. The comparative period in the prior year was
affected by sporadic closures and lockdowns which make direct comparisons
difficult but, subject to unforeseen events, sales are expected to continue to
grow in the second half. Retail revenue in the 8 weeks to 20 November
increased 35% compared to the same period last year.
Gross margin in the second half is expected to be similar to, or slightly
higher than, the 67% achieved in the second half last year.
The Lowest Carbon collection, crafted from the world's lowest carbon leather
and using a local and transparent supply chain, launched on 22 November 2021.
This is Mulberry's first capsule collection of regenerative "farm to finished
product", further supporting our Made to Last manifesto. This collection
represents the future of the business as we continue to build a network of
regenerative and organic farms to supply the hides to create our leather
across the UK and Europe. The capsule was also featured at the recent G20
Summit in Rome.
In view of the strong performance in the first half and the Group's
substantial cash reserves, a progressive increase in marketing expenditure is
planned in the second half to continue building brand awareness worldwide.
Projects are in place to move the Group's legacy systems forward, and to
develop the next generation of digital and omni-channel platforms. This is
expected to lead to increased capital expenditure next year and beyond.
The Group is expected to continue generating cash in the second half and with
the deferred liabilities expected to unwind, the Group will maintain a strong
cash position at the year end.
It should be noted that the outlook continues to be subject to a degree of
uncertainty as the important festive period commences. The Group's performance
would undoubtedly be negatively affected by any further countrywide lockdowns
or a further wave of COVID-19.
FINANCIAL REVIEW
Group revenue and gross profit
By 12 April 2021, all our stores worldwide were reopened following a second
wave of global lockdowns due to COVID-19.
Sales analysis for the 26 weeks to 25 September 2021 compared to the same
period last year is as follows:
2021 2020
£'m £'m % Change
Digital 19.1 23.4 -19%
Stores 36.5 19.5 +87%
Retail (omni-channel) 55.6 42.9 +30%
Franchise and wholesale 10.1 6.0 +67%
Group revenue 65.7 48.9 +34%
Digital 14.2 18.0 -21%
Stores 23.8 10.0 +139%
Omni-channel - UK 38.0 28.0 +36%
Digital 2.2 1.7 +30%
Stores 9.6 7.9 +22%
Omni-channel - Asia Pacific 11.8 9.5 +23%
Digital 2.7 3.7 -28%
Stores 3.1 1.7 +82%
Omni-channel - Rest of world 5.8 5.4 +7%
Total Retail (omni-channel) 55.6 42.9 +30%
Q1 Q2 H1 2021
£'m % Change £'m % Change £'m % Change
Sales Sales Sales
Digital 9.3 -36% 9.8 +11% 19.1 -18%
Stores 16.6 +202% 19.9 +42% 36.5 +87%
Retail (omni-channel) 25.9 +29% 29.7 +30% 55.6 +30%
Franchise and wholesale 6.4 +276% 3.7 -14% 10.1 +68%
Group revenue 32.3 +48% 33.4 +23% 65.7 +34%
Group revenue increased by 34% and was 3% above the same period in 2019 (pre
COVID-19) on a comparable basis (adjusting for store openings and closures).
In the UK, total retail sales recovered strongly and were 7% above the same
period in 2019 on a comparable basis. UK digital sales declined by 21% as
stores re-opened, but represented 37% of UK retail sales, compared to 26% in
2019, reflecting the accelerated shift to digital and omni-channel shopping.
China sales increased 38%, which contributed to the 23% increase in Asia
Pacific, driven by ongoing investment in the region. China digital sales
represented 43% of China retail sales.
Franchise and wholesale sales increased by 67% as our Franchise partners
benefited from the post COVID-19 recovery and increased demand following the
easing of restrictions.
Gross margin increased to 69% (2020: 59%) driven by a strategic focus on
full-price sales and increased volume efficiencies.
Other operating expenses
Other operating expenses in the period increased by 11.7% to £40.0m (2020:
£35.8m) due to further marketing spend to support international growth and
additional revenue related costs. The Group continued to benefit from the
business rates relief, albeit at a lower level than in the previous year.
Following the cost actions taken in response to COVID-19, the Group is
managing its cost base in line with anticipated trading levels.
Other operating income
Included within other operating income in the period is £nil (26 weeks ended
26 September 2020: £4.1m and 52 weeks ended 27 March 2021 £4.9m) of grants
receivable under the Coronavirus Job Retention Scheme (CJRS). The Group
decided not to utilise the CJRS in the period due to the strong trading
performance.
Profit before tax
The Group's reported profit before tax for the period was £10.2m (2020: loss
before tax of £2.3m), which included a one-off profit of £5.7m on the early
termination and the exit of a lease in Paris. The Group's underlying profit
before tax was £4.5m (2020: loss before tax of £1.9m).
See note 2 for further details of Alternative Performance Measures.
Taxation
The Group reported a tax charge for the period of £2.9m (2020: £0.3m) which
includes a £2.4m charge on the profit on the disposal of an intangible lease
asset, in respect of the early termination of the Paris lease. The effective
tax rate is 14% (2020: 14%) on underlying profit and is lower than the UK tax
rate for the period of 19% primarily due to the use of brought forward tax
losses and not recognising deferred tax assets on the Group's accumulated tax
losses.
Balance Sheet
Intangible assets decreased by £8.6m to £6.4m (2020: £15.0m) predominantly
due to the early termination of the Paris lease. Right-of-use assets decreased
by £8.3m to £34.6m (2020: £42.9m) due to an impairment charge against
right-of-use assets recorded in the 26 weeks to 27 March 2021.
Net working capital, which comprises inventories, trade and other receivables
and trade and other payables decreased by £2.0m to £19.4m (2020: £21.4m).
This was mainly due to the decrease in inventories, as we continue to manage
our inventory position, and the increase in debtors and creditors due to
increased volume. There has been a slight increase in inventories since 27
March 2021 with increased inventories of raw materials to protect the Group
from supply chain delays, balanced by reduced finished goods as the agile
supply chain systems continue to deliver results.
The reduction in lease liabilities (current and non-current) by £17.3m to
£70.9m (2020: £88.2m) is primarily due to the renegotiation and termination
of certain leases.
Cash flow
The net increase in cash and cash equivalents per the cash flow statement of
£18.5m (2020: £0.6m) mainly reflected the strong financial performance in
the period and the net proceeds from the early termination of the Paris lease,
slightly offset by higher capital expenditure in Asia Pacific.
The profit and proceeds from the disposal of intangibles of £5.4m and £13.3m
respectively relate to the early termination of the Paris lease.
Borrowing facilities
The Group had no bank borrowings at 25 September 2021. The borrowings shown in
the balance sheet are loans from minority shareholders in the Chinese and
Japanese subsidiaries.
The Group's net cash balance (cash and cash equivalents less overdrafts) at 25
September 2021 was £30.3m (2020: £8.6m). Net cash comprises cash balances of
£30.3m (2020: £8.6m).
During the period the Group extended its secured revolving credit facility
(RCF) with HSBC until March 2023, and renegotiated covenants to reflect the
ongoing COVID-19 environment. The RCF covenants are tested quarterly on a
"frozen GAAP" basis (excluding the impact of IFRS 16) and contain a net debt
to EBITDA ratio, and a fixed charge cover ratio. The RCF was undrawn during
the period, and we do not anticipate drawing on the facility in the second
half.
In addition, the Group has a £4.0m overdraft facility which is renewed
annually.
Going concern
The Group has continued to trade significantly ahead of the Directors'
original base case forecasts with a cash position materially ahead of
assumptions, enhanced by the net proceeds from the early termination of a
lease in Paris, announced on 6 July 2021. As a result, the Directors remain
confident that despite the current uncertainties, the Group has the financial
resources to enable it to continue to operate as a going concern for the
foreseeable future.
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
Our omni-channel distribution model is designed to allow customers to
research, buy and return product anywhere across our stores and digital
platforms.
We aim to enhance our customers' experience and drive engagement, and this
includes developing our store network through selective store openings and
closures, the continued roll-out of the new Mulberry store concept and further
enhancements to our digital network.
Most of our retail stores were open by 12 April 2021 and except for some
localised restrictions, trade was uninterrupted in the first half of the
year. UK retail sales also benefited from the development of our omni-channel
distribution, providing the customer with a single view of inventory, which
helped to drive a stronger full price sales mix.
Virtual and in-store appointments continue to play an important part in the
customer journey, even after the stores reopened, representing 8% of all UK
store sales and resulting in an increased average transaction value (compared
to store walk-ins).
Digital sales represented 29% of Group revenue, which demonstrates the
accelerated shift to digital and omni-channel shopping across all regions. In
Asia Pacific, digital sales grew to 19% of the region's sales, supported by
local fulfilment in Japan and the development of strategic partnerships,
including T-Mall in China. China digital sales grew 22% and represented 43% of
total China sales. On 15 July 2021 we also launched a We Chat programme in
China, which coincided with the Alexa x Alexa launch. This is a long-term
programme with the aim of building brand awareness in the region, with content
regularly updated and tailored to relevant campaigns, products, and customers.
We have continued to refine the retail network. Our store network closed the
period with 113 points of sale inclusive of retail and franchise. This
included the opening of 7 doors internationally 6 in our new store concept.
There were 7 closures in the same period, including the early exit of our
Paris store. In the UK we operated 45 retail stores( 1 ) at the period end
(2020: 45), which included 12 John Lewis and 7 House of Fraser concessions. We
will continue to manage the business proactively and focus on optimising the
store network.
1 Store numbers include own stores and concessions operated by Mulberry
employees
Strategic pillar 2 - International development
We are optimising our digital channels and global store network, with a
particular focus on Asia Pacific, which continues to offer significant growth
opportunities.
Asia Pacific retail sales increased by 23%, driven by ongoing investment in
the region, with China retail sales up 38%, South Korea retail sales up 7% and
Japan retail sales up 54%. Retail sales in South Korea and Japan were
disrupted to some extent by regional and local lockdowns in the period. In
Asia Pacific we operated 38 retail stores at the period end (2020: 34). During
the period we opened 4 retail stores in China in Beijing (2), Chengdu and
Wuhan and 2 retail stores in South Korea, which included our new store
concept. This features design elements that represent our distinctive British
heritage and enables us to better display and promote our collections. The
concept includes innovative customer-facing technology, creates more space and
supports our omni-channel proposition. It has helped to elevate our brand
position with the new concept stores outperforming more traditional outlets.
As stated above, the 4 stores opened in China were Beijing World Financial
Centre, Beijing Shin Kong Place and Wuhan Heartland 66, along with a pop-up in
Chengdu International Finance Square. A further opening in Shanghai
International Finance Centre is due to open in November 2021.
The investment in the Group's subsidiaries supported the overall growth, with
China and South Korea making further progress in the period. Higher sell
throughs and reduced mark down periods also contributed to this success as
well as better positioning for the brand.
Our global pricing strategy, which sets retail prices in all markets and
currencies at the same level, is a competitive difference giving our customers
the confidence to shop the brand in their home markets.
During the period it was agreed to terminate the lease of our Paris store
which closed on 24 July 2021. We plan to open a new store in Paris once
international tourism returns in a location which supports the Company's
omni-channel approach and optimises its customer centric retail experience.
Strategic pillar 3 - Constant innovation
We continue to innovate with new services, new materials and methods of
creation and production to adapt to changing customer tastes and meet demand.
At the same time, we are transforming our agile supply chain, enhancing market
reactivity, and reducing lead time, to match the increase in digital demand.
In September, we launched the Sadie family, a timeless satchel with the new
Typography lock, and the Billie family, a youthful crossbody slouchy
silhouette. Both families are crafted from leather sourced from our partner
tanneries with positive environmental credentials and Leather Working Group
ratings.
We have continued our 50th anniversary celebrations through a series of joyful
collaborations with three of the most visionary designers of their generation
- Priya Ahluwalia, Richard Malone and Nicholas Daley. Each designer has
created a capsule collection as part of Mulberry Editions, a new offering of
limited-edition accessories that have been delivered throughout 2021. Crafted
entirely from surplus fabrics and leather, the Mulberry x Ahluwalia collection
heroes the Portobello Tote silhouette, which was our first 100% sustainable
leather bag, launched in 2019. The Richard Malone capsule sees the Irish
designer reinvent the iconic Bayswater with his signature authenticity,
resourcefulness, sustainability, and experimentation. This Bayswater updates
the silhouette's timeless detailing and is crafted with our sustainable
Eco-Scotchgrain, made from recombined bio-plastic materials, and embossed with
a distinctive pebble grain finish. The Nicholas Daley capsule will launch in
January 2022.
Strategic pillar 4 - Sustainable lifecycle
Mulberry products have been Made to Last from the outset and we are committed
to lifetime service for a Mulberry item. In April 2021 we launched our Made to
Last manifesto, which sets us apart from our competition. We are committed to
transform our business to be a regenerative and circular model that will
encompass the entire supply chain, from field to wardrobe by 2030.
We launched Mulberry Exchange in February 2020, our circular buy-back and
re-sale programme. This was further extended in April 2021 through the digital
launch of the Mulberry Exchange programme on Mulberry.com. Through the
Mulberry Exchange programme, we buy back bags from customers who are ready for
a change, repair and restore them in our Lifetime Service Centre at The
Rookery, and list them through one of our resale channels. Any bags which are
not fit for repair are sent for energy reclamation at our strategic partner,
Scottish Leather Group, powering the production of new leather to make the
next Mulberry bags.
In July, Mulberry committed to setting Science Based Targets, and joined a
group of over 650 global businesses working to hold temperature rise to 1.5°C
above pre-industrial levels. Mulberry's listing as "committed" is just the
first step on our journey towards our aim of achieving Net Zero emissions by
2035.
86% of the collection now uses leather and suede sourced from environmentally
accredited tanneries; expected to increase to 100% by Autumn/Winter 2022. All
other non-leather materials are fully sustainable.
Marketing and brand
To mark our 50th anniversary year, Mulberry announced the launch of the Made
to Last manifesto, laying out an ambitious commitment to transform the
business to a regenerative and circular model, encompassing the entire supply
chain, from field to wardrobe by 2030. The 360-campaign kicked off with a
livestreamed launch event (due to Covid restrictions), featured a series of
global brand advocates in the sustainability sphere and was supported by a
global media plan featuring the manifesto. May 2021 saw the launch of The
Mulberry Exchange on Mulberry.com; to support this we partnered with Dazed on
a Tik Tok focussed activation, commissioning a series of up-and-coming Tik Tok
stars to style a selection of our pre-loved bags.
As mentioned above, to support our collaborations with designers Priya
Ahluwalia, Richard Malone and Alexa Chung, we held a series of events to
promote these visionary designers and their collections globally. A highlight
of these was an event at the V&A in September's London fashion week to
showcase Malone's eco-friendly version of our timeless Bayswater bag using
Eco-Scotchgrain and leather from gold standard, environmentally accredited
tanneries.
We continued our focus on building relationships in the digital marketing
space, with new and existing digital media partners and third-party affiliates
to reach younger audiences and drive new customer growth on our digital
platforms. Our designer collaborations across the year were aligned to reach
these younger, fashion forward audiences, with Alexa x Alexa being the peak of
this in July. The success of Alexa x Alexa also ran into August with
additional spend and placements booked to continue the strong performance seen
here.
CONSOLIDATED INCOME STATEMENT
26 WEEKS ENDED 25 september 2021
Note
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 £'000 26 September 2020 £'000 £'000
Revenue 65,719 48,919 114,951
Cost of sales (20,326) (20,019) (41,879)
Gross profit 45,393 28,900 73,072
Impairment charge related to property, plant and equipment - - (590)
Impairment charge related to right-of-use assets - - (5,725)
Store closure credit (1) 5,700 1,992 3,702
Lease modification - 3,951
Other operating expenses (39,960) (35,785) (71,638)
Other operating income (2) 779 4,691 6,006
Operating profit/(loss) 11,912 (202) 8,778
Share of results of associates 61 (32) (60)
Finance income 8 3 12
Finance expense (1,769) (2,121) (4,176)
Profit/(loss) before tax 10,212 (2,352) 4,554
Tax (charge)/credit 4 (2,929) 330 43
Profit/(loss) for the period 7,283 (2,022) 4,597
Attributable to:
Equity holders of the parent 7,568 (1,713) 4,773
Non-controlling interests (285) (309) (176)
Profit/(loss) for the period 7,283 (2,022) 4,597
Basic profit/(loss) per share 5 12.2p (3.4p) 7.7p
Diluted profit/(loss) per share 5 12.2p (3.4p) 7.7p
All activities arise from continuing operations.
(1) For the 26 weeks ended 26 September 2020 the store closure
credit of £1,992,000 was included within Other operating expenses
(2) Included within Other operating income is £nil (26 weeks ended 26
September 2020: £4,089,000; 52 weeks ended 28 March 2021: £4,868,000) of
grants receivable under HM Revenue & Customs Coronavirus Job Retention
Scheme and £435,000 (26 weeks ended 26 September 2020: £448,000; 52 weeks
ended 28 March 2021: £471,000) from similar overseas schemes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
26 WEEKS ENDED 25 SEPTEMBER 2021
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 £'000 26 September 2020 £'000 £'000
Profit/(loss) for the period 7,283 (2,022) 4,597
Items that may be reclassified subsequently to profit or loss;
Exchange differences on translation of foreign operations (295) 412 (49)
Total comprehensive income/(expense) for the period 6,988 (1,610) 4,548
Attributable to:
Equity holders of the parent 7,287 (1,506) 4,294
Non-controlling interests (299) (104) 254
Total comprehensive income/(expense) for the period 6,988 (1,610) 4,548
CONSOLIDATED BALANCE SHEET
AT 25 SEptember 2021
Unaudited Unaudited Audited
25 September 2021 £'000 26 September 2020 £'000 27 March 2021
£'000
Non-current assets
Intangible assets 6,412 15,032 14,965
Property, plant and equipment 13,521 15,436 13,608
Right of use assets 34,592 42,936 33,511
Interests in associates 253 128 134
Deferred tax asset 635 1,487 1,234
55,413 75,019 63,452
Current assets
Inventories 32,041 33,580 31,476
Trade and other receivables 13,204 11,453 12,609
Current tax asset - 432 525
Cash and cash equivalents 30,328 8,595 11,820
75,573 54,060 56,430
Total assets 130,986 129,079 119,882
Current liabilities
Trade and other payables (25,845) (23,739) (22,629)
Current tax liabilities (1,912) - -
Lease liabilities (15,356) (17,849) (14,820)
Borrowings (1,321) (3,431) -
(44,434) (45,019) (37,449)
Net current assets 31,139 9,041 18,981
Non-current liabilities
Lease liabilities (57,342) (70,400) (59,054)
Borrowings (3,504) (1,491) (4,673)
(60,846) (71,891) (63,727)
Total liabilities (105,280) (116,910) (101,176)
Net assets 25,706 12,169 18,706
Equity
Share capital 3,004 3,004 3,004
Share premium account 12,160 12,160 12,160
Own share reserve (1,272) (906) (1,277)
Capital redemption reserve 154 154 154
Foreign exchange reserve 979 1,735 1,274
Retained earnings 14,546 (54) 6,957
Equity attributable to holders of the parent 29,571 16,093 22,272
Non-controlling interests (3,865) (3,924) (3,566)
Total equity 25,706 12,169 18,706
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
26 WEEKS ENDED 25 SEPTEMBER 2021
Share Share premium account £'000 Own share reserve £'000 Capital re-demption reserve £'000 Foreign exchange reserve £'000 Retained earnings £'000 Non-controlling interest £'000 Total equity £'000
capital Total £'000
£'000
As at 28 March 2020 3,004 12,160 (1,061) 154 1,323 1,761 17,341 (3,820) 13,521
Loss for the period - - - - - (1,713) (1,713) (309) (2,022)
Other comprehensive income/(expense) for the period - - - - 207 - 207 205 412
Total comprehensive income/(expense) for the period - - - - 207 (1,713) (1,506) (104) (1,610)
Charge for employee share-based payments - - - - - 53 53 - 53
Impairment of shares in trust - - 155 - - (155) - - -
Non-controlling interest foreign exchange - - - - 205 - 205 - 205
As at 26 September 2020 3,004 12,160 (906) 154 1,735 (54) 16,093 (3,924) 12,169
Profit for the period - - - - - 6,486 6,486 133 6,619
Other comprehensive (expense)/income for the period - - - - (686) - (686) 225 (461)
Total comprehensive (expense)/income for the period - - - - (686) 6,486 5,800 358 6,158
Charge for employee share-based payments - - - - - 52 52 - 52
Own shares - - 101 - - 5 106 - 106
Exercise of share options - - - - - (4) (4) - (4)
Release of impairment of shares in trust - - (472) - - 472 - - -
Non-controlling interest foreign exchange - - - - 225 - 225 - 225
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 - - - - (281) - (281) (14) (295)
Total comprehensive (expense)/income for the period - - - - (281) 7,568 7,287 (299) 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) - (14)
As at 25 September 2021 3,004 12,160 (1,272) 154 979 14,546 29,571 (3,865) 25,706
CONSOLIDATED CASH FLOW STATEMENT
26 WEEKS ENDED 25 september 2021
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 28 March 2020
25 September 2021 £'000 26 September 2020 £'000
£'000
Operating profit/(loss) for the period 11,912 (202) 8,778
Adjustments for:
Depreciation and impairment of property, plant and equipment 1,850 2,311 4,777
Depreciation and impairment of right-of-use assets 3,257 3,654 13,245
Amortisation of intangible assets 914 542 1,476
Gain on lease modifications and disposals (548) (2,215) (10,314)
(Profit)/loss on sale of property, plant and equipment (8) - 188
Profit on sale of intangible assets (5,343) - -
Own shares transferred from trust 5 - 106
Share-based payments charge 24 53 105
Operating cash flows before movements in working capital 12,063 4,143 18,361
(Increase)/decrease in inventories (604) 1,335 3,420
Increase in receivables (595) (378) (1,534)
Increase in payables 2,966 1,532 75
Cash generated by operations 13,830 6,632 20,322
Income taxes received 101 332 201
Interest paid (1,772) (943) (3,960)
Net cash inflow from operating activities 12,159 6,021 16,563
Investing activities:
Interest received 8 3 12
Purchases of property, plant and equipment (1,260) (657) (1,895)
Proceeds from disposal of property, plant and equipment 8 - 26
Acquisition of intangible fixed assets (868) (633) (2,233)
Proceeds from disposal of intangible assets 13,316 - -
Net cash generated/(used) in investing activities 11,204 (1,287) (4,090)
Financing activities:
Increase in loans from non-controlling interests 165 - 167
Repayment of borrowings - (750) (750)
Principle elements of lease payments (4,989) (3,343) (7,735)
Settlement of share awards - - (4)
Net cash used in financing activities (4,824) (4,093) (8,322)
Net increase in cash and cash equivalents 18,539 641 4,151
Cash and cash equivalents at beginning of period 11,820 7,998 7,998
Effect of foreign exchange rate changes (31) (44) (329)
Cash and cash equivalents at end of period 30,328 8,595 11,820
Notes to the condensed financiAL statements
26 WEEKS ENDED 25 SEPTEMBER 2021
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 25 September 2021 (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 25
September 2021 have not been reviewed or audited.
The information for the 52 weeks ended 27 March 2021 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
20 July 2021 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 52 weeks ended 27 March 2021.
These condensed consolidated interim financial statements for the 26 weeks
ended 25 September 2021 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 52 weeks
ended 27 March 2021, 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 74-76 of the
Group's Annual Report and Financial Statements for the 52 weeks ended 27 March
2021.
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 21-27 of the Group's Annual
Report and Financial Statements for the 52 weeks ended 27 March 2021.
ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Group presents Alternative Performance
Measure ("APMs"), which are not defined or specified under the requirements of
IFRS. The APM used by the Group is adjusted profit/(loss) before tax.
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.
A reconciliation of reported profit/(loss) before tax to adjusted
profit/(loss) before tax is set out below.
Unaudited Unaudited Audited
26 weeks ended 25 September 2021 £'000 26 weeks ended 26 September 2020 £'000 52 weeks ended 27 March 2021
£'000
Reconciliation to adjusted profit/(loss) before tax
Profit/(loss) before tax 10,212 (2,352) 4,554
Restructuring costs - 2,151 2,370
Store closure credit (5,700) (1,992) (3,702)
Impairment charge related to property, plant and equipment - - 590
Impairment charge related to right-of-use assets - - 5,725
Lease modification - - (3,951)
Licence agreement exit costs - 300 300
Adjusted profit/(loss) before tax - non-GAAP measure 4,512 (1,893) 5,886
Adjusted basic profit/(loss) per share (note 5) 6.8p (3.4p) 10.5p
Adjusted diluted profit/(loss) per share (note 5) 6.8p (3.4P) 10.5p
Restructuring costs
During the period, one-off charges of £nil (2020: £2,151,000) were incurred
relating to people restructuring costs.
Store closure credit
During the period, 1 international store (2020: 2 international stores) was
closed. The credit/profit on disposal is net of any closure and redundancy
costs.
Licence agreement exit costs
During the period the Group incurred charges of £nil (2020: £300,000) from
the write-off of its ready-to-wear and footwear licence relating to final
samples and materials on non-renewal of the licence and distribution agreement
for these lifestyle products.
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 £30.3 million (2020: £8.6 million) and deferred
liabilities of £5.0m (2020: £4.6m) at 25 September 2021 and had not drawn
down 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/(credit) is calculated by applying the forecast full year
effective tax rate to the interim profit(/loss) and calculating the deferred
tax balance for the period. The charge for the 26 weeks ended 25 September
2021 also includes a charge of £2.4m (2020: £nil) for the tax on the gain on
disposal of an intangible lease asset.
5. EARNINGS PER SHARE ('EPS')
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 26 September 2020
Basic profit/(loss) per share 12.2p (3.4p) 7.7p
Diluted profit/(loss) per share 12.2p (3.4p) 7.7p
Adjusted basic profit/(loss) per share 6.8p (3.4p) 10.5p
Adjusted diluted profit/(loss) per share 6.8p (3.4p) 10.5p
Earnings per share is calculated based on the following data:
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended
25 September 2021 £'000 26 September 2020 £'000 27 March 2021
£'000
Profit/(loss) for the period for basic and diluted earnings per share 7,283 (2,022) 4,597
Adjustments to exclude exceptional items:
Restructuring costs* - 1,757 1,931
Store closure credit* (3,242) (1,992) (3,611)
Impairment relating to retail assets - - 590
Impairment relating to right-of-use assets - - 5,725
Lease modification* - (3,200)
Licence agreement exit costs* - 243 243
Adjusted profit/(loss) for the period for basic and diluted earnings per share 4,041 (2,014) 6,275
*These items are included net of tax
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 Million 26 September 2020 Million Million
Weighted average number of ordinary shares for the purpose of basic EPS 59.5 59.5 59.5
Effect of dilutive potential ordinary shares: share options - - -
Weighted average number of ordinary shares for the purpose of diluted EPS 59.5 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
The Group has identified one reportable segment.
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. The distribution of product globally is
monitored and optimised at a Group level and effected via the Group's
distribution centres in the UK, Europe, North America and Asia. 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 attributable to this segment.
GROUP INCOME STATEMENT
26 WEEKS ENDED 25 september 2021
Note
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 £'000 26 September 2020 £'000 £'000
Retail 36,585 19,539 43,586
Digital 19,066 23,364 56,365
Wholesale 10,068 6,016 15,000
Total revenue 65,719 48,919 114,951
Cost of sales (20,326) (20,019) (41,879)
Gross profit 45,393 28,900 73,072
Impairment charge related to property, plant and equipment - - (590)
Impairment charge related to right-of-use assets - - (5,725)
Store closure credit 5,700 1,992 3,702
Lease modification - - 3,951
Other operating expenses (39,960) (35,785) (71,638)
Other operating income 779 4,691 6,006
Operating profit/(loss) 11,912 (202) 8,778
Share of results of associates 61 (32) (60)
Finance income 8 3 12
Finance expense (1,769) (2,121) (4,176)
Profit/(loss) before tax 10,212 (2,352) 4,554
Tax (charge)/credit 4 (2,929) 330 43
Profit/(loss) for the period 7,283 (2,022) 4,597
Segment capital expenditure 2,170 1,592 3,996
Segment depreciation and amortisation 6,021 6,507 19,498
Segment assets 130,351 127,592 118,648
Segment liabilities 105,280 116,910 101,176
For the purposes of monitoring segment performance and allocating resources
between segments, the Chief Operating Decision Maker, which is deemed to be
the Board of Directors monitors the tangible intangible and financial assets
attributable to each segment. All assets are allocated to the reportable
segment.
(b) Geographical markets
Sales revenue by Non-current assets by
geographical market ((1)) geographical market
Unaudited Unaudited Audited Unaudited Audited
26 weeks ended 26 weeks ended 52 weeks ended 27 March 2021 Unaudited 26 weeks ended 52 weeks ended 27 March 2021
25 September 2021 26 September 2020 £'000 26 weeks ended 26 September 2020 £'000
£'000 £'000 25 September 2021 £'000
£'000
UK 40,002 29,038 68,573 45,829 61,037 50,792
Rest of Europe 8,651 7,132 15,014 1,483 9,564 8,487
Asia 13,313 10,199 24,636 4,160 3,274 3,362
North America 3,562 2,368 6,261 3,941 1,144 811
Rest of world 191 182 467 - - -
Total revenue 65,719 48,919 114,951 55,413 75,019 63,452
(1) Revenue by geographical market includes wholesale sales based on the
location of the customer.
(c) 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.
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