(BRBY.L) Burberry Group PLC Buy/Sell

RNS Number : 5972C
  Burberry Group PLC
  17 November 2009
   

CONDENSED GROUP INCOME STATEMENT - UNAUDITED

                         Note       Six months to      Six months to 30          Audited
                                30 September 2009        September 2008          Year to
                                               £m                    £m         31 March
                                                                                   2009 
                                                                                      £m
   Revenue                  3               572.4                 539.1          1,201.5
   Cost of sales                          (229.7)               (216.0)          (535.7)
   Gross profit                             342.7                 323.1            665.8
   Net operating                          (260.6)               (223.0)          (675.7)
   expenses
   Operating                                 82.1                 100.1            (9.9)
   profit/(loss)
   Financing
   Interest receivable                        0.1                   3.9              7.2
   and similar income
   Interest payable and                     (3.8)                 (7.0)           (13.4)
   similar charges
   Net finance charge                       (3.7)                 (3.1)            (6.2)
   Profit/(loss) before                      78.4                  97.0           (16.1)
   taxation
   Taxation                 5              (21.1)                (22.2)             11.0
   Profit/(loss) for                         57.3                  74.8            (5.1)
   the period
 
   Attributable to:
   Equity holders of                         56.8                  74.8            (6.0)
   the company
   Minority interest                          0.5                     -              0.9
   Profit/(loss) for                         57.3                  74.8            (5.1)
   the period

   Earnings/(loss) per share
   - basic                                               6  13.1p  17.3p  (1.4p)
   - diluted                                             6  12.9p  17.0p  (1.4p)
 
                                                               £m     £m      £m
   Non-GAAP measures
   Operating profit/(loss)                                   82.1  100.1   (9.9)
   Restructuring costs                                   4    4.2      -    54.9
   Goodwill impairment charges                           4      -      -   116.2
   Store impairment and onerous lease provisions         4      -      -    13.4
   Negative goodwill                                     4      -  (1.7)   (1.7)
   Relocation of headquarters                            4      -      -     7.9
   Adjusted operating profit                             3   86.3   98.4   180.8
   Adjusted earnings per share
   - basic                                               6  13.8p  15.6p   30.6p
   - diluted                                             6  13.6p  15.3p   30.2p
 
   Dividends per share
   - Proposed interim (not recognised as a liability at  7  3.50p  3.35p   3.35p
   30 September)
   - Final (not recognised as a liability at 31 March)   7      -      -   8.65p

      CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED

    
                                      Six months to       Six months to   AuditedYear to
                                  30 September 2009   30 September 2008         31 March
                                                 £m                  £m             2009
                                                                                      £m
 Profit/(loss) for the period                  57.3                74.8            (5.1)
 Other comprehensive income:                                                            
 Cash flow hedges                              24.1                 5.5           (10.7)
 Foreign currency translation                (28.0)                17.8            116.8
 differences
 Tax on other comprehensive                                                             
 income:
 Cash flow hedges                             (6.8)               (1.5)              3.1
 Foreign currency translation                   1.6               (1.8)            (4.3)
 differences
 Other comprehensive                          (9.1)                20.0            104.9
 (expense)/income for the
 period, net of tax
 Total comprehensive income for                48.2                94.8             99.8
 the period
 Total comprehensive income                                                             
 attributable to:
 Owners of the company                         47.6                94.8             98.8
 Minority interest                              0.6                   *              1.0
                                               48.2                94.8             99.8

      CONDENSED GROUP balance sheet - UNAUDITED

                                 Note               As at               As at         Audited
                                        30 September 2009   30 September 2008           As at
                                                       £m                  £m        31 March
                                                                                         2009
                                                                                           £m
 ASSETS
 Non-current assets
 Intangible assets                  8                57.2               151.7            57.5
 Property, plant and equipment      9               247.8               209.6           258.6
 Deferred tax assets                                 58.6                28.0            57.7
 Trade and other receivables       10                12.0                 8.3             9.5
                                                    375.6               397.6           383.3
 Current assets
 Inventories                                        215.1               330.7           262.6
 Trade and other receivables       10               204.2               196.6           187.2
 Derivative financial assets                          6.2                13.7            23.2
 Income tax receivables                              16.8                10.4            17.1
 Cash and cash equivalents                          267.4               158.4           252.3
                                                    709.7               709.8           742.4
 Total assets                                     1,085.3             1,107.4         1,125.7

 LIABILITIES
 Non-current liabilities
 Trade and other payables          11              (23.9)              (16.4)          (23.8)
 Deferred tax liabilities                           (2.2)               (6.4)           (2.3)
 Derivative financial                                   -                   -           (0.4)
 liabilities
 Retirement benefit obligations                     (0.5)               (0.4)           (0.6)
 Provisions for other              12               (9.3)               (3.7)           (7.9)
 liabilities and charges
                                                   (35.9)              (26.9)          (35.0)
 Current liabilities
 Bank overdrafts and borrowings    13             (211.1)             (272.7)         (244.7)
 Derivative financial                               (6.3)              (26.6)          (57.1)
 liabilities
 Trade and other payables          11             (178.6)             (167.8)         (162.4)
 Provisions for other              12              (16.9)                   -          (33.5)
 liabilities and charges
 Income tax liabilities                            (67.8)              (64.1)          (49.1)
                                                  (480.7)             (531.2)         (546.8)
 Total liabilities                                (516.6)             (558.1)         (581.8)

 Net assets                                         568.7               549.3           543.9

 EQUITY
 Capital and reserves
 attributable to the Company's
 equity holders
 Ordinary share capital                               0.2                 0.2             0.2
 Share premium account                              178.3               175.5           175.9
 Capital reserve                                     27.2                27.2            27.2
 Hedging reserve                                      3.9               (1.8)          (13.4)
 Foreign currency translation                       123.7                53.8           150.2
 reserve
 Retained earnings                                  228.0               292.3           199.2
                                                    561.3               547.2           539.3
 Minority interest                                    7.4                 2.1             4.6
 Total equity                                       568.7               549.3           543.9

CONDENSED GROUP statement of changes in equity - UNAUDITED

                                                        Attributable to owners of the company
                                 Note  Ordinary Share          Share premium  Other reserves  Retained earnings   Total  Minority Interest    Total 
                                               capital               account              £m                 £m      £m                 £m    equity
                                                    £m                    £m                                                                      £m
 Balance as at 1 April 2008                        0.2                 174.3            58.6              262.2   495.3                  -     495.3
 Profit for the period                               -                     -               -               74.8    74.8                  -      74.8
 Other comprehensive income:
 Cash flow hedges - losses                           -                     -           (3.4)                  -   (3.4)                  -     (3.4)
 deferred in equity
 Cash flow hedges - losses                           -                     -             8.9                  -     8.9                  -       8.9
 transferred to income
 Foreign currency translation                        -                     -            17.8                  -    17.8                  -      17.8
 differences
 Tax on other comprehensive                          -                     -           (3.3)                  -   (3.3)                  -     (3.3)
 income
 Total comprehensive income for                      -                     -            20.0               74.8    94.8                  -      94.8
 the period
 Transfer between reserves                           -                     -             0.6              (0.6)       -                  -         -
 Transactions with owners:
 Employee share option scheme
 - value of share options                            -                     -               -                1.3     1.3                  -       1.3
 granted
 - tax on share options granted                      -                     -               -              (1.7)   (1.7)                  -     (1.7)
 - exercise of share options       14                -                   1.2               -                  -     1.2                  -       1.2
 - price differential on                             -                     -               -              (6.9)   (6.9)                  -     (6.9)
 exercise of shares
 Purchase of own shares by                           -                     -               -              (5.4)   (5.4)                  -     (5.4)
 ESOPS
 Sale of own shares by ESOPs                         -                     -               -                5.8     5.8                  -       5.8
 Minority share of acquisition                       -                     -               -                  -       -                2.1       2.1
 Dividend paid in the period                         -                     -               -             (37.2)  (37.2)                  -    (37.2)

 Balance as at 30 September                        0.2                 175.5            79.2              292.3   547.2                2.1     549.3
 2008

 Balance as at 1 April 2009                        0.2                 175.9           164.0              199.2   539.3                4.6     543.9
 Profit for the period                               -                     -               -               56.8    56.8                0.5      57.3
 Other comprehensive income:
 Cash flow hedges - gains                            -                     -             7.1                  -     7.1                  -       7.1
 deferred in equity
 Cash flow hedges - losses                           -                     -            17.0                  -    17.0                  -      17.0
 transferred to income 
 Foreign currency translation                        -                     -          (28.1)                  -  (28.1)                0.1    (28.0)
 differences
 Tax on other comprehensive                          -                     -           (5.2)                  -   (5.2)                  -     (5.2)
 income
 Total comprehensive income for                      -                     -           (9.2)               56.8    47.6                0.6      48.2
 the period
 Transactions with owners:
 Employee share option scheme
 - value of share options                            -                     -               -                7.7     7.7                  -       7.7
 granted
 - tax on share options granted                      -                     -               -                2.9     2.9                  -       2.9
 - exercise of share options       14                -                   2.4               -                  -     2.4                  -       2.4
 - price differential on                             -                     -               -              (1.6)   (1.6)                  -     (1.6)
 exercise of shares
 Sale of own shares by ESOPs                         -                     -               -                0.4     0.4                  -       0.4
 Capital contribution by                             -                     -               -                  -       -                2.2       2.2
 minority interest
 Dividend paid in the period                         -                     -               -             (37.4)  (37.4)                  -    (37.4)

 Balance as at 30 September                        0.2                 178.3           154.8              228.0   561.3                7.4     568.7
 2009

      CONDENSED GROUP statement of cash flows - UNAUDITED

                                 Note       Six months to       Six months to           Audited
                                        30 September 2009   30 September 2008           Year to
                                                       £m                  £m         31 March 
                                                                                           2009
                                                                                             £m
 Cash flows from operating
 activities
 Operating profit                                    82.1               100.1             (9.9)
 Depreciation                                        21.0                17.3              44.8
 Amortisation                                         3.1                 2.2               4.8
 Net impairment charge                                2.5                   -             126.8
 Negative goodwill                                      -               (1.7)             (1.7)
 Loss on disposal of property,                        0.7                 0.1               2.0
 plant and equipment
 Fair value (gains)/losses on                       (7.8)                 2.3              10.7
 derivative instruments
 Charges in respect of employee                       7.7                 1.3               4.5
 share incentive schemes
 (Increase)/decrease in                              33.6              (43.8)              55.7
 inventories
 (Increase)/decrease in                            (25.2)              (23.9)               2.1
 receivables
 Increase/(decrease) in                               7.1               (8.1)               2.2
 payables
 Cash generated from operations                     124.8                45.8             242.0
 Interest received                                    0.1                 3.8               7.7
 Interest paid                                      (3.8)               (7.1)            (13.6)
 Taxation paid                                      (7.4)               (7.6)            (26.3)
 Net cash inflow from operating                     113.7                34.9             209.8
 activities
 Cash flows from investing
 activities
 Purchase of tangible and                          (32.5)              (40.3)            (89.9)
 intangible fixed assets
 Proceeds from sale of                                  -                 0.1               0.1
 property, plant and equipment
 Capital contribution by                              2.2                   -                 -
 minority interest
 Acquisition of subsidiaries                            -               (1.7)             (0.3)
 Net cash outflow from                             (30.3)              (41.9)            (90.1)
 investing activities
 Cash flows from financing
 activities
 Dividends paid in the year                        (37.4)              (37.2)            (51.7)
 Issue of ordinary share                              0.7                   -                 -
 capital
 Sale of own shares by ESOPs                          0.4                 0.1               0.2
 Purchase of own shares by                              -               (5.4)             (5.4)
 ESOPs
 Repayment of borrowings                           (39.7)                   -           (109.0)
 Proceeds from borrowings                               -                34.5              35.5
 Derivatives matured during the                     (2.2)                   -               5.7
 year and remaining in equity
 Net cash outflow from                             (78.2)               (8.0)           (124.7)
 financing activities
 Net increase/(decrease) in                           5.2              (15.0)             (5.0)
 cash and cash equivalents 
 Effect of exchange rate                            (1.9)               (0.6)              13.2
 changes on opening balances
 Cash and cash equivalents at                        53.0                44.8              44.8
 beginning of period
 Cash and cash equivalents at                        56.3                29.2              53.0
 end of period

ANALYSIS OF CASH AND CASH EQUIVALENTS
                                                  As at               As at          Audited
                                      30 September 2009   30 September 2008            As at
                                                     £m                  £m        31 March 
                                                                                        2008
                                                                                          £m
 Cash and cash equivalents as                     267.4               158.4            252.3
 per the balance sheet
 Bank overdrafts                 13             (211.1)             (129.2)          (199.3)
 Cash and cash equivalents as                      56.3                29.2             53.0
 per the cash flow statement 
 Bank borrowings                 13                   -             (143.5)           (45.4)
 Net cash/(debt)                                   56.3             (114.3)              7.6

notes to the consolidated financial statements

1.   Corporate information

Burberry Group (the 'Group') is a luxury goods manufacturer, wholesaler and retailer in Europe, the Middle East, the Americas and Asia Pacific. Licensing activity is also carried out, principally in Japan. All of the companies which comprise the Group are owned by Burberry Group plc (the 'Company') directly or indirectly. 

2.   Accounting policies and basis of preparation

The financial information contained in this report is unaudited. The Condensed Group Income Statement, Condensed Group Statement of Comprehensive Income, Condensed Group Statement of Changes in Equity and Condensed Group Statement of Cash Flows for the interim period to 30 September 2009, and the Condensed Group Balance Sheet as at 30 September 2009 and related notes have been reviewed by the auditors and their report to the Company is set out on page 27. These interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 were approved by the Board of Directors on 18 May 2009 and filed with the Registrar of Companies. The report of the auditors on the statutory accounts for the year ended 31 March 2009 was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 237 of the Companies Act 1985.

These condensed consolidated financial statements for the six months ended 30 September 2009 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and 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 year ended 31 March 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

Accounting policies and presentation are consistent with those applied in the Group's financial statements for the year ended 
31 March 2009, as set out on pages 80 to 84, with the exception of the adoption of IAS 1(Revised) Presentation of financial statements and IFRS 8 Operating segments, both of which are discussed below.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 April 2009:

IAS 1 (Revised) Presentation of financial statements

Requires the presentation of items of income and expenses (that is 'non-owner changes in equity') in either a single performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income) and requires such items to be presented separately from owner changes in equity in the statement of changes in equity. The Group has elected to present this information in the format of two performance statements - an income statement and a statement of comprehensive income, in line with the revised disclosure requirements.
    

IFRS 8 Operating segments

Requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes and regularly reviewed by the Board, in its capacity as the Chief Operating Decision Maker, in order to allocate resources to the segment and assess its performance. In order to comply with the requirements of this new standard, the Group has amended its segmental reporting information, restating comparative information as appropriate.

The new standards, amendments and interpretations issued and effective for the financial period commencing on or after 1 April 2009 which have not had a material impact on the financial statements of the Group include:

IAS 23 (Revised) Borrowing Costs

IFRS 2 (Amendment) Share-based payments

IAS 1 (Amendment) Presentation of financial statements

IAS 39 (Amendment) Financial instruments: Recognition and measurement 

IFRS 1 (Amendment) First time adoption of IFRS and IAS 27 (Amendment) Consolidated and separate financial statements

IFRIC 14 IAS 19 - The limit on a defined benefit asset minimum funding requirements and their interaction

IFRIC 16 Hedges of a net investment in foreign operations 

The following new standards, amendments and interpretations have been issued, but are not yet effective for the financial period beginning 1 April 2009, and have not been early adopted:

IFRS 3 (Revised) Business combinations 

The standard will continue to apply the acquisition method to business combinations, but with certain significant changes. All payments to purchase a business will be recorded at fair value at the acquisition date, with some contingent payments subsequently remeasured at fair value through income. Goodwill and non-controlling (minority) interests may be calculated on a gross or net basis. All transaction costs will be expensed. The amendments will take effect for annual periods beginning on or after 1 July 2009, and will be applied by the Group to all business combinations with effect from 1 April 2010.

Non-GAAP measures

Non-GAAP measures are those items that are largely one-off and material in nature and are presented in order to provide a clear and consistent presentation of the underlying performance of the Group's ongoing business. 

3.   Segmental analysis

The Chief Operating Decision Maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on the reports used by the Board.

The Board considers Burberry's business through its two channels to market, being Retail/Wholesale and Licensing. Retail/Wholesale revenues are generated by the sale of luxury goods through Burberry mainline stores, concessions and outlets as well as Burberry franchisees and prestige department stores globally. Licensing revenues are generated through the receipt of royalties from Burberry's partners in Japan and global licensees of fragrances, eyewear, timepieces and European childrenswear.

The Board assesses channel performance based on a measure of adjusted earnings before interest and tax (EBIT). This measurement basis excludes the effects of non-recurring events. The measure of earnings for each operating segment that is reviewed by the Board includes an allocation of corporate and central costs. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Board. Comparative information has been restated on the adoption of IFRS 8. 

                                           Retail / Wholesale                          Licensing                                 Total
                                   Six months to         Six months to     Six months to         Six months to     Six months to         Six months to 
                                     30 September          30 September      30 September          30 September      30 September          30 September
                                             2009                  2008              2009                  2008              2009                  2008
                                                             (restated)                              (restated)                              (restated)
                                               £m                    £m                £m                    £m                £m                    £m
 Total segment revenue                      527.7                 499.4              53.7                  51.3             581.4                 550.7
 Inter-segment revenue                          -                     -             (9.0)                (11.6)             (9.0)                (11.6)
 Revenue from external                      527.7                 499.4              44.7                  39.7             572.4                 539.1
 customers
 Adjusted EBIT (reportable                   48.0                  64.4              38.3                  34.0              86.3                  98.4
 segments)
 Non-GAAP measures(1)                                                                                                       (4.2)                   1.7
 Net finance charge                                                                                                         (3.7)                 (3.1)
 Profit before taxation                                                                                                      78.4                  97.0

 Year to 31 March 2009 (restated)     Retail / Wholesale  Licensing    Total
                                                      £m         £m       £m
 Total segment revenue                           1,118.9      107.5  1,226.4
 Inter-segment revenue                                 -     (24.9)   (24.9)
 Revenue from external customers                 1,118.9       82.6  1,201.5
 Adjusted EBIT (reportable segments)               110.1       70.7    180.8
 Non-GAAP measures(1)                                                (190.7)
 Net finance charge                                                    (6.2)
 Loss before taxation                                                 (16.1)

(1) Refer to Condensed Group Income Statement for details of non-GAAP measures
                            Six months to          Six months to             Year to
                             30 September           30 September            31 March
                                      2009                  2008                2009
                                                      (restated)          (restated)
 Revenue by destination                 £m                    £m                  £m
 Europe                              194.8                 177.7               379.8
 Spain                               49.1                   70.7               144.5
 Americas                            138.6                 128.7               308.9
 Asia Pacific                        117.2                 103.2               240.0
 Rest of the world                    28.0                  19.1                45.7
 Retail/Wholesale                    527.7                 499.4             1,118.9
 Licensing                            44.7                  39.7                82.6
 Total                               572.4                 539.1             1,201.5
    

4.   Non-GAAP measures

Included in operating profit for the six months ended 30 September 2009 are net restructuring charges of £4.2m associated with the Group's cost efficiency programme which was announced in the year to 31 March 2009.

5.   Taxation

The effective underlying rate of tax on adjusted profit for the full year is estimated to be 27.0% (31 March 2009: 23.8%; 30 September 2008: 29.5%). 

6.   Earnings per share

The calculation of basic earnings per share is based on profit attributable to equity holders of the company for the period divided by the weighted average number of ordinary shares in issue during the period. Basic and diluted earnings per share based on adjusted operating profit and the underlying effective tax rate are also disclosed to indicate the underlying profitability of Burberry Group.

                                   Six months to     Six months to       Year to 
                                     30 September      30 September     31 March 
                                             2009              2008          2009
                                               £m                £m            £m
 Attributable profit for the                 59.8              67.2         132.1
 period before non-GAAP
 measures(1)
 Effect of non-GAAP measures(1)             (3.0)               7.6       (138.1)
 (after taxation)
 Profit/(loss) attributable for              56.8              74.8         (6.0)
 the period

(1) Refer to Condensed Group Income Statement for the details of non-GAAP measures

The weighted average number of ordinary shares represents the weighted average number of Burberry Group plc ordinary shares in issue throughout the period, excluding ordinary shares held in Burberry Group's share option plan trusts 'ESOP trusts'.
    

Diluted earnings per share is based on the weighted average number of ordinary shares in issue during the period. In addition, account is taken of any awards made under the share incentive schemes which will have a dilutive effect when exercised.

                                       Six months to         Six months to            Year to 
                                         30 September          30 September          31 March 
                                                 2009                  2008               2009
                                             Millions              Millions           Millions
 Weighted average number of                     432.0                 431.0              431.3
 ordinary shares in issue
 during the period
 Dilutive effect of the share                     7.2                   8.9                6.8
 incentive schemes
 Diluted weighted average                       439.2                 439.9              438.1
 number of ordinary shares in
 issue during the period

 Basic earnings per share             Six months to        Six months to         Year to 
                                        30 September         30 September       31 March 
                                                2009                 2008            2009
                                               Pence                Pence           Pence
 Basic earnings per share                       13.8                 15.6            30.6
 before non-GAAP measures(1)
 Effect of non-GAAP measures(1)                (0.7)                  1.7          (32.0)
 (after taxation)
 Basic earnings per share                       13.1                 17.3           (1.4)

 Diluted earnings per share
 Diluted earnings per share                     13.6                 15.3            30.2
 before non-GAAP measures(1)
 Effect of non-GAAP measures(1)                (0.7)                  1.7          (31.6)
 (after taxation)
 Diluted earnings per share                     12.9                 17.0           (1.4)

(1) Refer to Condensed Group Income Statement for the details of non-GAAP measures
    

7.   Dividends

The interim dividend of 3.50p (2008: 3.35p) per share has been approved by the Board of directors after 30 September 2009. Accordingly, this dividend has not been recognised as a liability at the period end.

The interim dividend will be paid on 4 February 2010 to Shareholders on the Register at the close of business on 8 January 2010.

A dividend of 8.65p (2008: 8.65p) per share was paid during the period ended 30 September 2009 in relation to the year ending 31 March 2009. 

8.   Intangible assets

In the period there were additions to intangible assets of £4.7m (2008: £5.2m) and disposals with a net book value of £0.5m (2008: £nil).

Impairment testing

Assets that have an indefinite useful economic life are not subject to amortisation and are tested annually for impairment. 

Goodwill at 30 September 2009 is £31.6m (2008: £129.6m).

Management has performed a review for indicators of impairment as at 30 September 2009. With the exception of Guam, discussed below, there is no indication that the remaining goodwill balance may be impaired. The annual impairment test will be performed at 31 March 2010.

On 30 August 2008, the Group terminated its franchisee agreement in Guam, thereby settling a pre-existing liability. A new company, Burberry Guam Inc., was incorporated which acquired the retailing business from the terminated franchisee. Based on management's current estimates, the recoverable amount of goodwill in respect of Burberry Guam Inc. does not exceed its carrying value. Consequently, the net book value of £1.4m has been written off in full during the period.

9.   Property, plant and equipment

In the period there were additions to property, plant and equipment of £28.5m (2008: £37.3m) and disposals with a net book value of £0.2m (2008: £0.2m). Capital commitments contracted but not provided for by the Group amounted to £6.7m (2008: £16.8m). 
    

Impairment testing

Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. At 30 September 2009, a net impairment charge of £1.1m has been recognised in the income statement in respect of certain retail store assets.

10.   Trade and other receivables
                                              As at               As at        As at
                                  30 September 2009   30 September 2008     31 March
                                                 £m                  £m         2009
                                                                                  £m
 Non-current 
 Deposits and prepayments                      12.0                 8.3          9.5
 Total non-current trade and                   12.0                 8.3          9.5
 other receivables
 Current 
 Trade receivables                            166.3               154.8        146.5
 Other receivables                             13.3                16.5         13.7
 Prepayments and accrued income                24.6                25.3         27.0
 Total current trade and other                204.2               196.6        187.2
 receivables
 Total                                        216.2               204.9        196.7

11.   Trade and other payables
                                              As at               As at        As at
                                  30 September 2009   30 September 2008     31 March
                                                 £m                  £m         2009
                                                                                  £m
 Non-current
 Other payables, accruals and                  23.9                16.4         23.8
 deferred income
 Total non-current trade and                   23.9                16.4         23.8
 other payables
 Current
 Trade payables                                59.1                70.5         54.8
 Other taxes and social                         7.1                 7.7          7.8
 security costs
 Other payables                                14.3                20.0         16.4
 Accruals and deferred income                  98.1                69.6         83.4
 Total current trade and other                178.6               167.8        162.4
 payables
 Total                                        202.5               184.2        186.2

12.   Provisions 
                                 Property obligations  Restructuring costs   Total
                                                   £m                   £m      £m
 As at 1 April 2009                              13.9                 27.5    41.4
 Effect of foreign exchange                       0.1                (1.0)   (0.9)
 rate changes
 Created during the period                        0.8                  4.7     5.5
 Utilised during the period                     (1.8)               (17.2)  (19.0)
 Released during the period                         -                (0.8)   (0.8)
 As at 30 September 2009                         13.0                 13.2    26.2

 As at 30 September 2008                          3.7                    -     3.7

13.   Bank overdrafts and borrowings
                               As at               As at        As at
                   30 September 2009   30 September 2008    31 March 
                                  £m                  £m         2009
                                                                   £m
 Unsecured
 Bank overdrafts               211.1               129.2        199.3
 Bank borrowings                   -               143.5         45.4
 Total                         211.1               272.7        244.7
    

Bank overdrafts are offset by the Group's positive cash pooling balances arrangement. 

On 16 March 2009, a £200m multi-currency revolving facility was agreed with a syndicate of third party banks. This facility replaced the £200m five year multi-currency revolving facility in place as at 30 September 2008 which was due to mature on 30 March 2010. At 30 September 2009, there were no outstanding drawings (2008: £143.5m drawn down in Sterling and US dollars). Interest is charged on this loan at LIBOR plus 2.00%. The facility matures on 30 June 2012.

On 13 June 2008, bilateral multi-currency revolving credit facilities totalling £60m were agreed with two banks. At 30 September 2009, there were no outstanding drawings (2008: nil). Interest is charged on each of these facilities at LIBOR plus 0.95% on drawings less than 50% of the loan principal and at LIBOR plus 1.05% on drawings over 50% of the loan principal. The facilities mature on 13 June 2011.

14.   Share capital and other reserves

The cost of own shares held in the Burberry Group ESOP Trusts has been offset against retained earnings, as the amounts paid reduce the profits available for distribution by the Group and the Company. As at 30 September 2009 the amount offset against this reserve was £3.4m (2008: £4.5m).

Options exercised during the first half to 30 September 2009 resulted in 579,199 shares being issued (2008: 266,418). 347,573 options had no exercise price (2008: 266,418), with a related weighted average price at the time of exercise of £4.56 (2008: £4.56) per share. 231,626 options had an exercise price of £3.51 per share (2008: nil options), with cash exercise proceeds received of £0.7m.  

15.   Contingent liabilities

There have been no material changes to the Group's contingent liabilities since 31 March 2009.

16.   Related party disclosures

The Group's significant related parties are disclosed in the Annual Report for the year ended 31 March 2009. There were no material changes to these related parties in the period. No material related party transactions have taken place during the first six months of the current financial year.

17.   Foreign currency

The results of overseas subsidiaries are translated into the Group's presentation currency of Sterling each month at the weighted average exchange rate for the period according to the phasing of the Group's trading results. The weighted average exchange rate is used, as it is considered to approximate the actual exchange rates on the dates of the transactions. The assets and liabilities of such undertakings are translated at period end exchange rates.

Differences arising on the retranslation of the opening net investment in subsidiary companies, and on the translation of their results, are taken directly to the foreign currency translation reserve within equity. 

The principal exchange rates used were as follows:
                                       Average
                      Six months to     Six months to      Year to
                       30 September      30 September     31 March
                               2009              2008         2009
 Euro                          1.14              1.26         1.12
 US dollar                     1.60              1.93         1.42
 Hong Kong dollar             12.35             15.05        12.79
 Korean won                   2,019             2,008        1,967

                                  Closing
                          As at         As at      As at
                   30 September  30 September   31 March
                           2009          2008       2009
 Euro                      1.09          1.26       1.08
 US dollar                 1.60          1.78       1.43
 Hong Kong dollar         12.41         13.83      11.10
 Korean won               1,882         2,149      1,967

The average exchange rate achieved by the Group on its Yen licensing income, taking into account its use of Yen forward sale contracts on a monthly basis approximately 12 months in advance of royalty receipts, was Yen 170.4: £1 in the six months to 30 September 2009 (Six months to 30 September 2008: Yen 223.2: £1; Year to 31 March 2009: Yen 213.1: £1).

statement of directors' responsibilities

The directors confirm to the best of their knowledge that this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely: 

-   an indication of important events that have occurred during the first six months and their

impact on the condensed set of financial statements, and a description of the principal

risks and uncertainties for the remaining six months of the financial year; and 

-   material related party transactions in the first six months and any material changes in the

related party transactions described in the last Annual Report.

The directors of Burberry Group plc are listed in the Burberry Group plc Annual Report for the year ended 31 March 2009. A list of current directors is maintained on the Burberry Group website: www.burberryplc.com.

By order of the Board 

John Peace
Chairman 
17 November 2009

Stacey Cartwright
Chief Financial Officer 
17 November 2009

independent review report to burberry group plc

Introduction

We have been engaged by the Company to review the interim financial information in the half-yearly financial report ('interim report') for the six months ended 30 September 2009, which comprises the Condensed Group Income Statement, Condensed Group Statement of Comprehensive Income, Condensed Group Balance Sheet, Condensed Group Statement of Changes in Equity, Condensed Group Statement of Cash Flows and the related notes on pages 15 to 25. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.
    

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
    

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
    

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
    

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
17 November 2009
London

(a) The maintenance and integrity of the Burberry Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial report since it was initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

SHAREHOLDER INFORMATION

Registrar

Any enquiries relating to your shareholding, for example transfers of shares, change of name or address, amalgamation of share accounts, lost share certificates or dividend cheques, should be referred to the Company's Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, telephone: 0871 384 2839 (or +44 121 415 7047 from outside the UK).

In addition, Equiniti offer a range of shareholder information online at www.shareview.co.uk. A textphone facility for those with hearing difficulties is available by calling: 0871 384 2266 (or +44 121 415 7028 from outside the UK).

Amalgamating share accounts

Shareholders who have more than one account due to inconsistency in the name and address details may avoid duplicate mailings by asking the Registrar to amalgamate their holdings.

Dividends

The interim dividend of 3.50p per share will be paid on 4 February 2010 to shareholders on the register at the close of business on 8 January 2010.

Dividend Reinvestment Plan

The Group's Dividend Reinvestment Plan (DRIP) enables shareholders to use their cash dividends to buy further shares in the Company. Full details of the DRIP can be obtained from the Registrars. If you would like your interim and future dividends to qualify for the DRIP, completed application forms must be returned by 21 January 2010.

Electronic Communication

Shareholders may at any time choose to receive all shareholder documentation in electronic form via the internet, rather than through the post in paper format. Shareholders who decide to register for this option will receive an email each time a statutory document is published on the internet. To register to receive electronic communications please register at www.shareview.co.uk, you will need your Shareholder Reference Number which can be found on share certificates, dividend vouchers and most other shareholder correspondence.

ShareGift

Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating their shares to charity through ShareGift, a donation scheme operated by The Orr Mackintosh Foundation (registered charity 1052686). A ShareGift donation form can be obtained from Equiniti Limited. Further information is available at www.sharegift.org or by telephone on 
+44 (0) 20 7930 3737.

Company Website

This Interim Report and other information on Burberry including share price information and results announcements, is available via the internet on the Group's website at www.burberryplc.com.

 Financial calendar
 Interim results announcement             17 November 2009
 Third quarter trading update                 January 2010
 Dividend record date                       8 January 2010
 Dividend payment and DRIP purchase date   4 February 2010
 Second half trading update                     April 2010
 Preliminary results announcement                 May 2010
 Annual General Meeting                          July 2010

Registered office

Burberry Group plc
Horseferry House
Horseferry Road
London
SW1P 2AW
Telephone:     +44 (0) 20 3367 3000
Fax:         +44 (0) 20 3367 4910

www.burberryplc.com

Registered in England and Wales
Registered Number 03458224

<HR>---------------------------------------    
    

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
IR CKAKNOBDDADD

RNS Number : 5969C
  Burberry Group PLC
  17 November 2009
   

17 November 2009

Burberry Group plc

Interim results 

for the six months ended 30 September 2009

Burberry Group plc, the global luxury company, today announces its unaudited results for the six months ended 30 September 2009. 

Highlights 

 *  Solid business performance

*  Total revenue of £572m (2008: £539m)

*  Comparable store sales growth of 2% (Q2: 5%)

*  Adjusted profit before tax of £83m (2008: £95m)
                          -  Improved Q2 retail and gross margin performance

*  Profit before tax of £78m (2008: £97m) 

 *  Strong financial position at 30 September

*  Net cash of £56m (2008: net debt of £114m)

*  Tight management of inventory
                          -  Down 40% year-on-year at constant FX, to £215m 

*  Interim dividend increased by 4% to 3.50p 

 *  Good progress on key growth strategies 

*  Non-apparel 34% of revenue, up from 32% in H1 2008

*  Childrenswear 5% of revenue, up from 3% 

*  Retail 54% of revenue, up from 45% 

*  Emerging Markets 10% of revenue, up from 9% 

 *  Further progress on corporate initiatives

*  Japanese apparel licence amended to reduce term by five years and increase royalty income

*  Joint venture in India proposed, subject to government approval

*  Global cost efficiency programme fully implemented, resulting in full year savings of about £50m

Angela Ahrendts, Chief Executive Officer, commented:

"Burberry delivered a solid first half performance, reflecting the strength of the brand, business and team. We enter the second half confident in our core strategies, capitalising on product, region, channel and operational opportunities. The Board has increased the dividend to reflect the momentum in the business."

"Adjusted" refers to profitability measures (pre and post tax) calculated excluding:

1. Restructuring costs of £4.2m (2008: nil) relating to the Group's cost efficiency programme.

2. Credit of £1.7m in 2008 representing negative goodwill on the formation of the Burberry Middle East joint venture.

3. Impact of prior year tax adjustment in 2008. 

Underlying change is calculated at constant exchange rates.  

Certain financial data within this announcement have been rounded.

Enquiries

 Burberry                                           020 3367 3524
 Stacey Cartwright  EVP, Chief Financial Officer
 Fay Dodds          Director of Investor Relations

 Brunswick         020 7404 5959
 David Yelland   
 Laura Cummings  

There will be a presentation today at 9am (UK time) to investors and analysts at the Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. The presentation can be viewed live on the Burberry website (www.burberryplc.com) and can also be accessed live via a dial-in facility on 44 (0)20 7081 7194. The supporting slides and an indexed replay will also be available on the website later in the day.

Burberry will update on trading on 19 January 2010 when it will issue its Interim Management Statement in respect of the Third Quarter.

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements.  

This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares. Past performance is not a guide to future performance and persons needing advice should consult an independent financial adviser.

Group financial highlights

Revenue of £572m, up 6% reported, down 5% underlying excluding a £60m benefit from exchange rates

Adjusted retail/wholesale operating margin of 9.1% (2008: 12.9%). Gross margin down only 30 basis points; operating expenses up as guided; consistent with revenue shift to retail from wholesale which will continue in H2

Adjusted profit before tax of £82.6m (2008: £95.3m), including a £6.7m benefit from exchange rates

Reported profit before tax of £78.4m (2008: £97.0m), after balance of restructuring charges

Tax rate of 27% estimated for the full year

Adjusted diluted EPS of 13.6p; reported diluted EPS of 12.9p

Interim dividend increased by 4% to 3.50p, reflecting strong financial position and momentum in business 

Net cash of £56m at 30 September 2009 (2008: net debt of £114m), with working capital inflow of £15m in first half (2008: £76m outflow) 

                                 Six months to 30 September            % change
 £ million                               2009           2008    Reported  underlying
 Revenue                                572.4          539.1           6         (5)
                                                              
 Cost of sales                        (229.7)        (216.0)         (6)
 Gross margin                           342.7          323.1           6
 Adjusted operating expenses          (256.4)        (224.7)        (14)
 Adjusted operating profit               86.3           98.4        (12)        (19)
                                                              
 Restructuring costs                    (4.2)              -  
 Negative goodwill                          -            1.7  
 Operating profit                        82.1          100.1  
                                                              
 Net finance charge                     (3.7)          (3.1)  
 Profit before taxation                  78.4           97.0  
 Taxation                              (21.1)         (22.2)  
 Minority interests                     (0.5)              -  
 Attributable profit                     56.8           74.8  
                                                              
 Adjusted EPS (pence)                    13.6           15.3  
 EPS (pence)                             12.9           17.0  
 Weighted average number of             439.2          439.9  
 ordinary shares (millions)                                   

EPS is calculated on a diluted basis

INTERIM MANAGEMENT REPORT 

During the first half, Burberry made further progress against its original five key strategies in what remained challenging markets.

Leveraging the franchise

*     Burberry continued to shift marketing investment to drive brand momentum.  Digital marketing initiatives leveraged seasonal advertising imagery, PR and events, such as the Spring/Summer 2010 runway show, across a range of platforms to access new customers and reinforce the brand's position with existing customers.  

*     Burberry brought greater definition to its brand segments, through relabelling the tailored and casual components of the women's and men's apparel lines. From Spring/Summer 2010, the Burberry London label and the Burberry Brit label will designate, respectively, the more formal and more casual parts of the collection. The first freestanding concept stores for these labels will open in New York this month. 

*     Childrenswear revenue increased nearly 50% underlying during the half, in line with the brand's opportunities in this category.

*     The amendment to the apparel licence in Japan, announced in October 2009, increases Burberry's profitability in the short term. With the licence now expiring in 2015 (previously 2020), Burberry is better positioned to optimise its presence in Japan and the high growth Asian region over the intermediate term.   

Intensifying non-apparel development

*     Non-apparel was the strongest performing major division in the first half, contributing 34% of retail/wholesale revenue, up from 32% a year ago.  

*     Continued innovation drove growth in non-apparel, especially in large leather goods (which now account for 50% of non-apparel sales), small leather goods and soft accessories.  Replenishment and the ability to fulfil reorders quickly also contributed to growth.

*     The Japanese non-apparel joint venture is fully operational, with the new Tokyo headquarters opened this month and the newly refurbished Omotesando, Tokyo store re-opened last month. Although Japan remains a difficult market for luxury goods, Burberry has an opportunity to gain share in non-apparel as this is the first time the global collection is available in a significant way inside Japan.
    
Accelerating retail-led growth

*     Retail accounted for 54% of sales in the first half, up from 45% a year ago.

*     Burberry continued to improve the quality of its retail portfolio. During the first half, 23 directly-operated stores and concessions were opened, while major stores including Bond Street, London, 57th Street, New York and Ocean Centre, Hong Kong were renovated.  

*     The Burberry Experience, the sales and service programme, was extended to stores in Europe, Asia and the Americas in the first half, to be followed by the Middle East in the second half.  Laptops linking to the e-commerce site are being introduced into 60 stores to elevate customer service. 

Investing in under-penetrated markets

*     Sales in Emerging Markets accounted for 10% of sales in the first half - up from 9% in the same period last year.  There are over 90 Burberry stores in Emerging Markets, the majority of which are currently operated under franchise. 

*     China continued to perform strongly, with 44 franchise stores now, following seven openings in the first half, including the first standalone childrenswear store in this market.

*     A joint venture is in the process of being established in India, subject to government approval, and new franchise agreements have been signed in Lebanon and Mongolia, to increase further the brand's presence in high growth Emerging Markets.  

*     There is continued investment in the Americas across all channels, following the high demographic retail cluster strategy with additional openings in Toronto, for example; and further real estate gains in wholesale partners, including five shop-in-shops in New York.

Pursuing operational excellence

*     Burberry continued to drive benefits in sourcing, logistics and distribution.

*     The SAP conversion process is well underway in Asia.

*     There were further process improvements in assortment planning and replenishment, facilitated by better data from SAP and investment in teams to optimise this.

*     The global cost efficiency programme was fully implemented, resulting in full year savings of about £50m.  Along with the efficiencies announced in January 2009 (including the closure of Thomas Burberry, the rationalisation of internal manufacturing and driving benefits from investments made in supply chain, IT and infrastructure), six underperforming stores were closed in the period.  Total headcount has been reduced by over 1,000.  Benefits in the first half amounted to about £22m.

Revenue analysis

Total revenue in the first half was £572m, an increase of 6% reported and a decline of 5% underlying.  

Revenue by channel of distribution
            Six months to 30 September          % change
 £ million          2009          2008    reported  underlying
 Retail            311.6         245.0          27          14
 Wholesale         216.1         254.4        (15)        (23)
 Licensing          44.7          39.7          13         (6)
 Total             572.4         539.1           6         (5)
                                        

The Burberry Middle East joint venture was formed on 30 September 2008. This transaction marginally increased total underlying sales in the half (slight positive impact in retail; slight negative impact in wholesale)

Retail 

Retail sales, which accounted for 54% of total revenue in the first half, increased by 14% on an underlying basis (up 27% reported).  Within this, comparable store sales increased by 2% (or up 4% excluding Spain).  New space and Burberry Middle East contributed 8% and 4% respectively to the 14% growth.

Total comparable store sales accelerated in the half (Q1: flat; Q2: +5%), due primarily to a positive response from consumers to the Autumn/Winter 2009 collections. In mainline stores, footfall improved throughout the period and average selling prices were marginally higher year-on-year, helped by outperformance from non-apparel, especially handbags, as well as casual outerwear.  By region, Europe and Asia again showed double-digit comparable store sales growth, while the United States and Spain were down double-digit.  E-commerce, which is now live in over 25 countries, grew by about 50% in the period, albeit from a small base.

Wholesale 

Wholesale revenue for the first half of the year declined by 23% on an underlying basis (down 15% reported). This is slightly ahead of guidance of down about 25% given in April 2009.

Of the underlying decline, 10% resulted, as planned, from Burberry's own actions. These included the closure of Thomas Burberry as part of the global cost efficiency programme, the continued planned rationalisation of many small specialty accounts in Europe and the conversion of Burberry Middle East from wholesale to retail.  

The balance (-13%) reflects lower shipments of the Autumn/Winter 2009 collections in all regions of the world. These ranges were ordered from late November 2008, which was the first opportunity for wholesale customers to reduce their inventory levels for all brands following the economic slowdown.  Excluding Spain, the weakest market, the decline was 10% rather than 13%.

In conjunction with local franchisees, Burberry opened a net nine stores during the half, bringing the total number of franchise stores at 30 September 2009 to 90.  The openings included two in Bahrain and seven in China, of which one was a freestanding childrenswear store in Beijing.  

Licensing 

Total licensing revenue in the first half decreased by 6% on an underlying basis and was up 13% on a reported basis, reflecting primarily the strength of the yen, which is largely hedged 12 months forward. 

In October 2009, Burberry announced an amendment to its apparel licence with Sanyo Shokai Ltd and Mitsui & Co., Ltd in Japan. The main change was that the licence agreement now terminates in June 2015 (previously 2020) with no right of renewal. Burberry will also receive higher royalty payments than previously planned and enhanced performance criteria based on higher levels of production have been introduced from 1 January 2011 until the expiry of the licence agreement.  

For the half, with this amendment, Japanese royalty income was down only mid-single digits year-on-year in what remains a challenging environment for department stores, the licensees' main channel to market.  Growth from global product licences, especially fragrances, was more than offset by the planned termination of local menswear licences.  Notice has been served to terminate the last two remaining licences, allowing Burberry to develop and offer a fully cohesive mens' tailored or London collection for Autumn/Winter 2010.

Burberry continues to work more closely with its global licensees to capitalise on its brand momentum in fragrance, eyewear and timepieces.  New product initiatives include the relaunch of the Burberry Brit fragrance available now in-store to support the segmentation of the Brit collection, as well as the launch of a Burberry Sport fragrance for Spring/Summer 2010.

Retail/wholesale revenue by destination 
                         Six months to 30 September           % change
 £ million                       2009          2008    reported  underlying
 Europe*                        194.8         177.7          10           2
 Spain                           49.1          70.7        (31)        (37)
 Americas¿                      138.6         128.7           8         (9)
 Asia Pacific                   117.2         103.2          14           3
 Rest of world¿                  28.0          19.1          47          36
 Total retail/wholesale         527.7         499.4           6         (5)

* Excluding Spain

¿ Central and South America have been reclassified from Rest of world to Americas

Europe (37% of revenue)

Revenue in the first half in Europe increased by 2% on an underlying basis, up 10% reported.

Retail, which accounted for over half of the region's sales, increased strongly, driven by exceptional growth in the London stores, which have benefited from favourable currency and increased tourism since late 2008.  A new mainline store was opened in Amsterdam, three concessions were added in premier department stores, while two stores were closed as part of the cost efficiency programme. Wholesale declined double-digit in Europe. This was impacted in part by Burberry's decision to reduce the number of specialty accounts it sells to by over 200. This will also impact the second half. 

Spain (9% of revenue) 

Revenue in Spain was down 37% underlying (down 31% reported), with over half of the decline reflecting the closure of Thomas Burberry.  

The economic environment in Spain remained extremely challenging.  Retail, which is over half of Spain's revenue, declined double-digit on a comparable basis. Excluding Thomas Burberry, wholesale was down by around 30%, as the number of domestic independent retail customers again declined by more than 10%.  Wholesale is also expected to remain weak in the second half.

During the first half, as part of its global cost efficiency programme, Burberry significantly reduced the cost base in Spain, with headcount down by over 300 - almost halving the workforce in the Spanish headquarters.  The focus in Spain remains on improving the collections, driving local efficiencies and working ever more closely with the teams in London.

Americas (26% of revenue)

Revenue in the Americas declined 9% underlying, up 8% reported, in a period impacted by logistics issues associated with SAP conversion.

Retail, which contributed about 70% of revenue in the first half, saw a double-digit decline in comparable store sales, with some improvement towards the end of the period. Three mainline stores were opened in the half, including the first in Toronto, as Canada is a focus for growth through both the retail and wholesale channels. In the second half, Burberry expects to open three more stores - a flagship in Toronto and two freestanding concept stores at 444 Madison Avenue, the Americas headquarters - one Burberry London and the other Burberry Brit. These two stores will demonstrate a clearer segmentation of the collections to both consumers and wholesale customers.

Wholesale revenue declined double-digit in the first half, reflecting a cautious buy by major department store customers.  For the second half, US wholesale shows relative strength, driven by non-apparel and menswear, the latter helped by licence terminations.  Burberry is also gaining real estate with key customers, as the brand continues to outperform peers in core categories and expand new businesses such as childrenswear.  

Asia Pacific (22% of revenue)

Revenue in Asia Pacific increased by 3% on an underlying basis, up 14% reported.

Retail, which was two-thirds of Asian revenue in the half, delivered double-digit comparable store sales growth. This was led again by Korea, Burberry's largest Asian retail market outside Japan, where currency movements encouraged greater spending in Korea.  Hong Kong, the second largest market in the region, also performed well, especially in the second quarter. Five mainline stores were opened in the first half, including the region's first flagship in Singapore (Ion Orchard), a further childrenswear store in Hong Kong and two additional stores in Australia - a small but high growth market for Burberry. 

Wholesale revenue declined double-digit in the first half, with a fall in sales to travel retail customers throughout the region partly offset by continuing growth in China, where 44 stores are currently operated under franchise.  The Burberry brand continues to perform well in China, with strong double-digit comparable store sales growth in the half.  

The non-apparel joint venture in Japan is now fully operational, with a strong, local management team.  The flagship store in Omotesando, Tokyo (previously run under franchise) has recently been renovated to showcase the global non-apparel collection.  Up to ten shop-in-shops with luxury adjacencies will be open for Spring 2010.
    

Operating profit analysis

Total operating profit
                            Six months to 30 September            % change
 £ million                          2009           2008    reported  underlying
 Retail/wholesale                   48.0           64.4        (25)        (24)
 Licensing                          38.3           34.0          13        (10)
 Adjusted operating profit          86.3           98.4        (12)        (19)
 Adjusted operating margin         15.1%          18.3%  
                                                         
 Restructuring costs               (4.2)              -  
 Negative goodwill                     -            1.7  
 Operating profit                   82.1          100.1        (18)

Adjusted operating profit was £86.3m in the first half, resulting in a group operating margin of 15.1%.  Restructuring costs of £4.2m were incurred, being the final charge relating to the global cost efficiency programme announced in January 2009 (£54.9m was charged in the second half of the last financial year).

Retail/wholesale adjusted operating profit
                                     Six months to 30 September     % change
 £ million                                   2009           2008    reported
 Revenue                                    527.7          499.4           6
                                                                  
 Cost of sales                            (229.7)        (216.0)         (6)
 Gross margin                               298.0          283.4           5
 Gross margin %                             56.5%          56.8%  
                                                                  
 Operating expenses                       (250.0)        (219.0)        (14)
 Adjusted operating profit                   48.0           64.4        (25)
                                                                  
 Operating expenses as a % of sales         47.4%          43.9%  
 Adjusted operating margin                   9.1%          12.9%  

Retail/wholesale adjusted operating profit was £48.0m in the half, resulting in a 9.1% margin. Gross margin was better than expected, reflecting stronger full price sales. Operating expenses as a percentage of sales increased, as indicated at the preliminary results in May 2009. Retail was 54% of sales in the first half compared to 45% in the same period last year. This substantial shift in revenue mix increased gross margin but adversely impacted both the operating expense to sales ratio and the operating margin.

Gross margin  

Gross margin in the first half was down only 30 basis points, better than expected, due primarily to stronger full price sales towards the end of the period.

Year-on-year, the major factors impacting the gross margin percentage were savings from the cost efficiency programme (about £10m,  equivalent to about 200 basis points); the switch from wholesale to retail which is a higher gross margin channel (contributing around another 100 basis points); and a favourable exchange rate.  These factors were offset by higher markdowns in the first quarter compared to the same period last year. 

For the second half, Burberry continues to expect an improvement in the gross margin, helped by the shift to retail, continuing cost efficiencies and higher full price sell-through, given lower procurement of inventory for the period. 

Operating expenses 

At the preliminary results in May 2009, Burberry stated that it expected operating expenses as a percentage of sales to increase in 2009/10.

In the first half, operating expenses increased by £31m or 350 basis points as a percentage of sales to 47.4%. Savings of approximately £12m were realised from the global cost efficiency programme.  Exchange rate movements added £20m to costs and the shift in revenue mix to retail with new space and new ventures also added about £20m. 

For the full year, Burberry expects retail/wholesale operating expenses as a percentage of sales to remain in the high forties. 

Licensing operating profit
                     Six months to 30     Six months to 30 September 2009
                        September       
 £ million               2009     2008                     At constant FX
 Revenue                 44.7     39.7                               37.2
                                        
 Cost of sales              -        -                                  -
 Gross margin            44.7     39.7                               37.2
 Gross margin %          100%     100%                               100%
                                        
 Operating expenses     (6.4)    (5.7)                              (6.7)
                                        
 Operating profit        38.3     34.0                               30.5
                                        
 Operating margin       85.7%    85.6%  

Licensing revenue declined by 6% on an underlying basis and the operating margin was broadly flat at 85.7%.

Taxation 

The effective rate of tax on adjusted profit for the full year 2009/10 is estimated to be 27%, which is the rate applied in H1 2009 (2008: 29.5%).  The actual tax rate on reported profits for H1 2008 (22.9%) included a benefit from a prior year adjustment.

Cash flow and net debt 

Net cash at 30 September 2009 was £56.3m, compared to £7.6m at 31 March 2009 and net debt of £114.3m at 30 September 2008.  The significant improvement in the last twelve months results primarily from lower inventory (£215m at 30 September 2009 compared to £331m a year ago). This is equivalent to a 40% reduction at constant exchange rates (despite a 12% increase in average selling space) and reflects lower procurement for the current season and a reduction in aged inventory.  

In the first half, major cash flow items included a working capital inflow of £15m (2008: £76m outflow), capital expenditure lower at £33m (2008: £40m), depreciation higher at £24m (2008: £20m), with interest, tax and dividends broadly unchanged year-on-year at £48m.

Capital expenditure for the year to 31 March 2010 is now expected to be about £70m, including £3m on the Japanese non-apparel joint venture, compared to the expected depreciation charge of about £50m. 

The interest charge was £3.7m, reflecting low interest rates on cash balances, fees relating to early repayment of borrowings and fees incurred on the £260m banking facilities. Burberry expects a full year interest charge of about £5m.

Outlook 

The following revenue guidance is consistent with that given in October 2009.

Retail

For the full year, average selling space is expected to increase by between 8-10%, after adjusting for around a 1.5% negative impact from those stores closed as part of the global cost efficiency programme.  Burberry plans to open around 15 additional mainline stores in the full year, biased towards Asia and the Americas.  

Average selling space increased by 12% in the first half, with about 6-7% planned for the second half (net of the impact of the stores closed in the first half).

Wholesale

For the second half, Burberry expects wholesale revenue to be down by around 15% at constant currency. Of this, about half comes from Burberry's own actions, including the second half impact of closing Thomas Burberry and certain specialty accounts in Europe. The balance of the decline comes mainly from ongoing weakness in Spain.  Demand for the global collection is planned to be broadly flat year-on-year.

Licensing

Reflecting the positive impact of the amendment to the Japanese apparel licence agreement, Burberry expects underlying licensing revenue for the full year to decline by between 5 and 10%. Reported revenue is expected to grow year-on-year due to currency benefits.

Principal risks and uncertainties 

The principal risks and uncertainties affecting the business activities of the Group are much in line with those detailed on pages 45 to 47 of the Burberry Group plc Annual Report 2008/09.  On an ongoing basis throughout the period, the Group carried out a formal process to identify, evaluate and manage significant risks faced by the Group.  The global economic downturn remains one of the principal risks and, aside from affecting consumers' purchases of luxury items, may have other effects such as changes in the fiscal and regulatory policies in the countries where the Group conducts its business.  In the view of the directors and except as described here, there has been no material change in these factors in respect of the remaining six months of the financial year.

APPENDIX

Retail/wholesale revenue by product category 
                         Six months to 30 September          % change
 £ million                       2009          2008    reported  underlying
 Womenswear                     187.5         188.2           -        (10)
 Menswear                       131.5         136.7         (4)        (14)
 Non-apparel                    181.6         157.0          16           4
 Childrenswear/other             27.1          17.5          55          40
 Total retail/wholesale         527.7         499.4           6         (5)

Store portfolio
                                 Directly-operated stores
                       Mainline stores  Concessions  Outlets  Total  Franchise stores
 At 31 March 2009                  119          253       47    419                81
 Additions                           8           13        1     22                11
 Closures                          (6)         (11)      (1)   (18)               (1)
 Transfers                           1            -        -      1               (1)
 At 30 September 2009              122          255       47    424                90

Store portfolio by region 
                                 Directly-operated stores
 At 30 September 2009  Mainline stores  Concessions  Outlets  Total  Franchise stores
 Europe*                            31           23       16     70                13
 Spain                               4          128        5    137                 -
 Americas¿                          59            -       22     81                 3
 Asia Pacific                       18          104        3    125                60
 Rest of world                      10            -        1     11                14
 Total                             122          255       47    424                90

* Excluding Spain

¿ Three franchise stores in the Americas are in Mexico

Sales to franchise stores reported in wholesale revenue

Retail net selling square footage at period end
                       000s square feet
 At 31 March 2007                   650
 At 31 March 2008                   740
 At 30 September 2008               780
 At 31 March 2009                   845
 At 30 September 2009               870

<HR>---------------------------------------    
    

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
IR FFLFWMSUSEDF

The Mail on Sunday

BURBERRY IS WEATHERING THE STORM

Burberry looks set to reveal a drop in profit of around eight percent to 77 million pounds when it announces first-half trading figures on Tuesday. Analysts, who believe Burberry has handled the recession better than other luxury brands, expect the company to issue a confident statement. Burberry has been employing Harry Potter star Emma Watson to model its clothes.

NATIONAL EXPRESS BOSS THREATENS LEGAL FIGHT

National Express majority shareholder Jorge Cosmen has threatened to take legal action against other directors if they try to force him off the board. He has already indicated strong opposition to a proposed 360 million pound rights issue. National Express claims that the Cosmen family, who own an 18.5 percent stake in the company, will lose their board seat if they fail to subscribe to the rights issue. The Cosmens argue that this will not be the case, and say lawyers agree with their interpretation.

ASOS PROFITS SLOW AS THE COLD SETS IN

Asos, Britain's biggest listed fashion website, is predicted to reveal a 4.3 million pound reduction in first-half profits growth on Tuesday, fuelling fears that its business is in decline. However, its performance in the UK was offset by overseas sales, which doubled. Broker Seymour Pierce blamed the warm autumn weather for a reduction in demand for cold-weather fashion products. Retailers are also worried about the prospect of another four-day Debenhams Christmas sale, but its effect on the high street is likely to be less marked than last year

The Sunday Times

LLOYDS TAKES 600 MILLION POUNDS HIT ON ADMIRAL PUBS

Lloyds Banking Group has been forced to wipe out between 400 and 600 million pounds of Admiral Taverns' debt and write-off a 120 million pounds loss on interest-rate swaps. Lloyds will be forced to take control of the pub chain and is the latest fall-out from the bank's ill-fated merger with HBOS. Admiral's expansion was fuelled by an 850 million pound loan from HBOS. The news comes just days after Lloyds revealed it could lose an estimated 700 million pounds from the collapse of Kenmore Property Group.

BA TO ROLL OUT SHARES STRATEGY

British Airways will hold talks with the Civil Aviation Authority over the creation of a separate group that will own the majority of the airline's shares. The purpose of the "national control company" is to preserve BA's traffic rights and it will control 50.1 percent of the voting shares in the UK half of the newly merged BA/Iberia group. It will not be paid any dividends. Iberia will have a matching control company. BA's chief executive Willie Walsh reiterated his interest in acquiring Heathrow's second largest airline BMI.

BAKER IN 1.5 BILLION POUND MATALAN BID

The owner of Poundland, private equity group Advent International, is expected to make a 1.5 billion pound bid for Matalan. Richard Baker, the former boss at Boots and now operating partner at Advent, will spearhead the bid. Matalan's sale is expected to attract bids from several private equity funds including TPG, CVC and Blackstone. Industry experts are confident Advent can make a successful bid because of its experience of the discount retail sector. Advent has enough firepower to succeed after it raised 5.9 billion pounds last year.

SHAREWATCH:

Micro Focus (outlook for the company is good)

The Sunday Telegraph

'KRAFT'S OFFER SHOWED CONTEMPT'

The chairman of Cadbury, Roger Carr, said Kraft's 9.8 billion pound bid for the confectionery firm was "in contempt of the market's expressed view" because it was much lower than analysts' valuations. Several hedge funds have extended their positions in Cadbury as they judge that Kraft will have to make a higher offer to be successful. An analyst's note has been circulating among Cadbury shareholders that said an offer of nine pounds a share would get management and shareholders to reconsider. The original offer valued the company at 718 pence.

EGG PRODUCER SET TO LAY OUT 35 MILLION POUNDS FOR GU

Britain's biggest egg producer, Noble Foods, is believed to be in exclusive negotiations to acquire Gu, the upmarket pudding maker, in a deal said to be worth 30 to 35 million pounds. Noble is believed to have fought off some stiff competition and is likely to keep Gu as a stand-alone business. Gu was set up six years ago and now supplies its puddings to Virgin Atlantic. The company.

EASYJET SET TO HIT PROFIT TARGETS

Analysts expect EasyJet to post pre-tax profits for 2009 of 43-44 million pounds, just days after British Airways merged with Iberia in a deal that Ryanair's Michael O'Leary described as "two drunks.holding each other up on the way home." Charles Stanley's Tony Shepard said EasyJet had done well in the current economic climate when most carriers are reporting losses. He forecast that EasyJet's profits in 2010 would rebound to hit 160 million pounds. This year's profit figure was down on last year's 110 million pounds following a 90 million pound first-half hit from increased fuel costs

.

SUNDAY QUESTOR:

Electrocomponents (buy)

Galiform (take profits)

The Independent on Sunday

KENMORE'S FAILURE BLAMED ON THE TROUBLES OF GERMAN LENDER

According to property sources, Kenmore Property Group was forced into administration by a repayment demand from troubled German lender HSH Nordbank, and not by the actions of Lloyds Banking Group. HSH is believed to have demanded repayment of an estimated 300 million pounds in loans as it undergoes restructuring of its balance sheet. This demand is understood to have forced Lloyds' hand by its demand for immediate repayment as it undertakes measures to resolve balance sheet issues.

NEW CHIEF LAUNCHES REED REVIEW

Erik Engstrom, the new chief executive of Reed Elsevier, is launching a review of the business which is set to last for at least six months and could lead to asset sales. Engstrom replaces Ian Smith, who left after only eight months in the top job. Reed wanted to sell its business information unit last year, but bids failed to meet the target price and Smith decided not to put the division back up for sale. According to insiders, Engstrom now has "carte blanche" to review the business. Reed closed down 0.7 per cent at 468 pence on Friday.

LAST-GASP CASH KEEPS AIRLINE FLYING - FOR NOW

A last minute cash injection at Scottish airline Flyglobespan is believed to have held off its collapse. Contingency plans to repatriate passengers had already reportedly been drafted and administrators appointed, but Globespan Group directors were able to secure last-minute funding. Flyglobespan made a 1.2 million pound profit in 2008 and won an industry award last month, but is believed to have hit financial problems when payments from credit card processing company E-Clear were delayed. Globespan Group offered no comment on the developments.

The Observer

RBS ATTACKED FOR BACKING CADBURY BID

A coalition of MPs and unions has criticised RBS for lending 630 million pounds to Kraft's takeover bid for Cadbury. Unite, which represents Cadbury workers, questioned RBS's support for Kraft, which has so far failed to rule out plant closures and job losses. Labour MP Khalid Mahmood has called for an investigation into how the taxpayer-funded bank is being allowed to lend to a company that may initiate mass UK redundancies if it wins the bid. RBS has also been criticised by anonymous City bankers who claim it is buying up loans from foreign banks to meet Government targets.

JOHN LEWIS GREETS CHRISTMAS WITH THE GIFT OF GUNS N' ROSES

John Lewis has chosen a cover version of Guns N' Roses' 1988 anthem "Sweet Child o' Mine" to back its Christmas TV advertising campaign. The first advertisement, featuring a version of the song recorded by Swedish folk group Taken By Trees, will air during the X Factor on Sunday. John Lewis has spent five million pounds on the campaign, but has been able to buy the same amount of media space as last year due to a decline in the cost of advertising.

WHISKY RULING COULD CLOSE ECO-DISTILLERY

New rules defining how traditional malt whisky is made could mean that an environmentally friendly distillery may be forced to cut jobs and scrap energy-efficient production methods. The Loch Lomond distillery, which produces over 20 million bottles of High Commissioner whisky a year, could be affected by plans to restrict the classification of Scotch malt whisky to whisky made "by batch distillation in pot stills". John Peterson, distilling director at Loch Lomond, criticised politicians for sending mixed messages about climate change, but the Scottish Whisky Association defended the new rules.

Prepared for Reuters by Durrants

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

By David Jones

LONDON, Nov 10 (Reuters) - Alison Cooper is set to become the second youngest female chief executive of a FTSE 100 company as she looks to put sales growth at the top of her agenda for the world's No 4 cigarette group Imperial Tobacco Plc
Cooper, 43, was widely tipped to take over the top job at the maker of Lambert & Butler and Gauloises cigarettes next year after shadowing current CEO Gareth Davis for eight months.
Davis is set to retire next May, the day before his 60th birthday.
"Alison has worked closely on all the big deals with Gareth so the transition at the top of Imperial would appear to be very smooth," said one tobacco industry analyst.
When she takes over, Cooper will join four other female CEOs of Britain's top 100 companies, and become the second woman to run a big tobacco company following Susan Ivey at United States-based Reynolds American Inc.
In her ten years at Imperial, Cooper has worked closely on the two big acquisitions that transformed Imperial into a world tobacco player - Reemtsma and Altadis -- but as big tobacco deals start to dry up her emphasis will be on sales growth.
"Imperial's highlights have been on acquisitions and cost control, now we will look for growth with our expanded business in different geographies," Cooper said on a conference call.
She is set the join Angela Ahrendts at luxury goods group Burberry Group Plc, Cynthia Carroll at mining group Anglo American Plc, Marjorie Scardino at publishing group Pearson Plc and Katherine Garrett-Cox, aged 41, at investment company Alliance Trust as female CEOs of FTSE 100 groups.
Davis has led Imperial since its demerger from the sprawling Hanson empire in 1996 where he embarked on a series of acquisitions to put the cigarette maker on a faster growth path than its arch British rival Gallaher.
Accountant-trained Cooper was appointed No 2 to Davis in March in a new role as chief operating officer, and with Davis long expected to retire around his 60th birthday it seemed only a matter of time before she got promoted.
Davis had dropped heavy hints about his hopes that his successor would come from within the Bristol-based cigarette maker because of the challenges and stoicism needed in a industry under attack from anti-health groups and governments.
"I am a massive advocate of internal succession," Davis said in May soon after Cooper's appointment as his number two.
Cooper has been at the heart of expansion of Imperial Tobacco buying Germany's Reemtsma in 2002 and Franco-Spanish Altadis in 2008 which transformed Imperial into the world's number four cigarette company from a largely domestic player.
Cooper joined the maker of Embassy and Richmond cigarettes in 1999 from accountants PricewaterhouseCoopers after having worked with Davis and his team for a number of years. She became group financial controller in 2001, before becoming director of finance and planning in 2003.
Cooper, married with two daughters, became sales and marketing regional director for Imperial's Western Europe region in 2005 and, two years later, joined the four-strong Imperial executive board in a new role as corporate development director.
In that role, she played a key part in the acquisition of the Gauloises, Gitanes and Fortuna maker Altadis and later its integration and achieving targeted cost savings.
With a predator move from its three bigger rivals unlikely due to competition reasons, Cooper now will be able to look to growth areas of Asia and Africa to expand sales.
Imperial is some way behind the world's top three cigarette groups Marlboro-maker Philip Morris International, British American Tobacco and Japan Tobacco, which bought Gallaher in 2007, but it is No 1 in Britain with a market share approaching 50 percent and No 2 in Europe.

(For report on Imperial earnings click on)

(Reporting by David Jones; Editing by Erica Billingham) Keywords: IMPERIAL/ (david.jones@thomsonreuters.com; +44 20 7542 7972; Reuters Messaging: david.jones.com@reuters.net)

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