TIDMMUL
RNS Number : 5526G
Mulberry Group PLC
07 November 2018
Mulberry Group plc
Results for the six months ended 30 September 2018
International strategy delivering results, UK market remains
challenging
Mulberry Group plc ("the Group" or "Mulberry"), the British
luxury brand, announces unaudited results for the six months ended
30 September 2018.
FINANCIAL SUMMARY
-- Total Revenue down 8% to GBP68.3 million (2017: GBP74.6 million)
-- International Retail sales up 13%
-- UK business profitable but affected by House of Fraser
administration and soft retail conditions, UK Retail sales down
11%
-- Global Digital Retail sales up 5%, representing 17% of sales (2017: 14%)
-- Underlying loss before tax* of GBP3.6 million (2017: loss
GBP0.6 million). After one-off costs for House of Fraser (GBP2.1
million) and Korea launch (GBP2.5 million), reported loss before
tax GBP8.2 million (2017: loss GBP0.6 million)
-- Net cash of GBP12.1 million at the end of the period (2017: GBP16.4 million)
OPERATING HIGHLIGHTS
-- New Korea and Japan entities complete Asia with own Retail
network expanded to 29 stores (2017: 1 store)
-- New Digital partnerships established in China with Toplife,
Secoo and VIP.com; further agreements planned
-- UK flagship store opened on Regent Street during September featuring new Mulberry concept
-- New eyewear licence agreement signed with De Rigo Vision launching during Spring 2019
CURRENT TRADING AND OUTLOOK
-- UK Retail like-for-like sales down 7% for 6 weeks to 3 November
-- Concession agreement signed with John Lewis & Partners, previously wholesale
-- The Group anticipates an underlying profit before tax* for
year to 31 March 2019, excluding one-off costs
THIERRY ANDRETTA, CHIEF EXECUTIVE OFFICER, COMMENTED:
"We are delivering on the strategy to develop Mulberry as a
global luxury brand with new subsidiaries in Korea and Japan, the
creation of Digital partnerships in China and the additions to our
own store network in Asia.
In the UK, our most important market, we are pleased to have
signed a concession agreement with John Lewis & Partners,
advancing our direct to consumer reach. We are proud to be the
largest manufacturer of luxury leather goods in the UK and remain
committed to supporting "Made in England" through our two Somerset
factories.
We are confident that our focus on international growth is the
correct strategy to develop Mulberry. We are well positioned for
the Christmas trading period, which as ever, will determine our
full year result."
* Underlying loss or profit before tax excludes one-off costs
for House of Fraser provisions (GBP2.1 million) and Korea launch
(GBP2.5 million) in H1 and anticipated John Lewis concession set up
costs (GBP1.4 million) in H2
FOR FURTHER DETAILS PLEASE CONTACT:
Headland
Lucy Legh / Emma Ruttle 020 3805 4822
Mulberry Investor Relations
Allegra Perry 020 7605 6795
GCA Altium
Sam Fuller / Tim Richardson 020 7484 4040
Barclays
Nicola Tennent / Stuart Muress 020 3134 9801
1. BUSINESS REVIEW
The Group's strategy is to develop Mulberry as a global luxury
brand. During the period, the Group continued to make progress in
International markets, although conditions in the UK, which
accounts for c. 68% of Group revenue, were challenging.
During August, the Group completed the establishment of Mulberry
Korea and held a significant marketing event in Seoul in September
to relaunch the brand. As anticipated in the Preliminary results
announcement reported on 13 June 2018, the Group incurred one-off
costs of GBP2.5 million during the first half of the year to
establish the new subsidiary in Korea, consisting of GBP1.8 million
for the marketing launch and GBP0.7 million for the write down to
cost of the inventory purchased from the previous distributor.
In addition, strategic digital partnerships in China were
established and the Group launched a Japanese digital platform.
As at 30 September 2018, the Group directly operated 29 stores
in the Asia Pacific region, an increase from 1 store at the same
time last year. A further 3 Retail stores have been opened in the
region subsequently.
The Group's UK business remains profitable although sales have
been affected by the House of Fraser administration, softer UK
consumer demand and lower tourist footfall. As advised in the
trading update announced on 20 August 2018, the House of Fraser
administration has significantly impacted the Group. In addition to
a bad debt and asset write off of GBP2.1 million, sales in the
Group's House of Fraser concessions and Digital platform were
materially lower during the period.
The Group's underlying loss for the period is GBP3.6 million
(2017: GBP0.6 million). After accounting for one off costs for
House of Fraser provisions and the Korea launch as noted above, the
loss before tax is GBP8.2 million (2017: GBP0.6 million).
Sales
Group revenue in the period decreased by 8% to GBP68.3 million
(2017: GBP74.6 million).
On a like-for-like ("LFL") basis, UK Retail sales were 7% lower,
however total UK Retail sales, including House of Fraser, were down
11%.
International Retail sales increased 13% to GBP12.4 million
(2017: GBP11.3 million) as the Group benefitted from revenue
generated in China, Taiwan, Hong Kong and Japan following the
acquisition of these key Asian territories and expansion of the
store network. Retail sales from Asian markets increased by GBP2.4
million relative to last year but were offset by a reduction in
Retail sales of GBP1.3 million in Europe and North America as the
Group closed 4 stores during the last twelve months to fine tune
the store estate. Korea transitioned from Wholesale to Retail at
the end of the period.
26 weeks 26 weeks Total change Like-for-like***
to 30-Sep to 30-Sep (this year change (this
2018 (GBP 2017 (GBP vs last year) year vs last
million) million) year)
------------ ------------ ----------------
UK Retail
Sales* 40.4 45.3 -11% -7%
International
Retail Sales** 12.4 11.3 +13% -1%
Group Retail
Sales 52.8 56.6 -6% -6%
Wholesale Sales 15.5 18.0 -14% n/a
Group Total Sales 68.3 74.6 -8% n/a
------------------- ------------ ------------ ---------------- -------------------
* UK Retail like-for-like sales exclude House of Fraser from
mid-August (GBP1.0 million sales generated during the period vs
2017: GBP2.0 million)
** International LFL is not considered relevant due to a high
degree of rotation of the store network
*** Like-for-like ("LFL") is defined as the year-on-year change
in sales from stores which have been trading for 12 months after
the store opening
Product
The Amberley handbag family continues to perform strongly with
further animations added to the range.
Group revenue continues to diversify across a number of bag
families in line with management's expectations, and a number of
new silhouettes were launched during the period, replacing
discontinued lines in the product portfolio.
The Artisan Studio continued to provide small quantities of
exclusive products, with some recent examples including a unique
series of mini Harlow bags created for the Korea launch, a Baywater
Tote with a Union Jack postman's lock design created for the
one-year anniversary of the Ginza G6 store and other exclusive
products created to coincide with the new Digital concessions with
Toplife and Secoo.
The Group continues to invest in both technical development and
craftsmanship skills across its UK factories in Somerset which
manufacture approximately 50% of Mulberry handbags. This remains a
point of distinction in the Group's product offering.
Licensing
The Group signed a new eyewear licence agreement with De Rigo
Vision S.p.A. ("De Rigo"), which will manufacture and co-distribute
the Mulberry range. Eyewear is considered to be complementary to
the brand's core leather goods offering and an important category
in building the lifestyle image to develop Mulberry into a global
luxury brand.
The collection, which has been designed by Mulberry, led by
Creative Director Johnny Coca, consists of sunglasses and optical
frames and is expected to launch during Spring 2019. The range will
be distributed through selective opticians and across the Mulberry
network.
Digital and Omni-channel
The Group concluded a number of strategic digital agreements
during the period, achieving a key objective in its Digital
strategy. In China, new concessions were initiated with Secoo and
VIP.com during the period, complementing the partnership with
Toplife, JD.com's luxury digital platform, which launched during
March 2018.
Omni-channel services continued to be enhanced with greater UK
functionality and the launch of local digital fulfilment in Japan
from June 2018.
Global Digital Retail sales increased 5% and represent 17% of
Group revenue (2017: 14%). In addition, Digital sales of Mulberry
products generated through wholesale partners grew 30% during the
period. In aggregate, Digital Retail sales and Digital sales of
Mulberry products through wholesale partners are estimated to
represent approximately 20% of total brand sales (2017: 15%),
calculated by "grossing up" Wholesale sales to retail price.
Own Retail Store Network
The global own Retail network consisted of 88 directly operated
stores and concessions at the end of the period (2017: 66
stores).
The International Retail store network has been significantly
increased and enhanced through the new entities established in
Asia, where the Group has increased the retail store base to 29
stores, from 1 store at the end of the prior year period. The
increase reflects both the transition of previously existing stores
from Wholesale to Retail, as well as the opening of new stores. As
a result of this high degree of addition and store rotation during
the last 12 months, like-for-like sales growth is not considered
relevant.
Since March 2018, the following major changes to the Retail
store portfolio have occurred:
-- UK: The new flagship store on Regent Street was opened during
September featuring the new Mulberry store concept. During the
period, 3 House of Fraser concessions closed and 1 standalone store
closed.
-- China: Following the acquisition of 3 stores during March
2018 as part of the Mulberry Asia acquisition, a further store has
been opened in Xian Shin Kong Place during April 2018.
-- Japan: The Group acquired 5 stores in Japan during May 2018
as part of the establishment of Mulberry Japan.
-- Korea: The Group acquired 18 stores in Korea during August
2018 as part of the establishment of Mulberry Korea.
As described above, the new Mulberry store concept has been
launched with the opening of the Regent Street store. The concept
is a collaboration between British architect Faye Toogood and
Johnny Coca, the Group's Creative Director, and features design
elements that represent the brand's distinctive British heritage.
The concept introduces advanced technology features, including an
innovative customer-facing mobile point of sale which has enabled
traditional EPOS tills to be completely removed and created an
enhanced customer experience in store. In addition to Regent
Street, the store in Heathrow Terminal 4 has been relocated and
furnished in the new concept following the end of the period. The
first International Partner store featuring the new concept was
opened during August in Melbourne, Australia, whilst the first
International Retail store in the new concept will be opened in
Korea by the end of 2018. The global roll out of the new concept
will continue during 2019 and is expected to be concluded during
the next few years.
Selective Wholesale and Franchise
Wholesale revenue, comprising sales to partner stores and
selective multi-brand wholesale accounts, reduced by 14% to GBP15.5
million (2017: GBP18.0 million) primarily due to the transition of
the China business to own Retail during March 2018 and preparation
for the Mulberry Korea transaction, which completed during August
2018.
The partner store network at the period end totaled 19 stores in
Asia Pacific, Europe and the Middle East (2017: 55 stores). This
reduction reflects the transfer of 28 stores from previous
distributors to the Group's Retail network, the closure of the
Sydney store in anticipation of the transfer of the Australia
business to the new distributor, Luxury Retail Group ("LRG"), the
closure of 1 store in South Korea in preparation for Mulberry Korea
and the closure of six non-strategic stores in the Middle East and
Southeast Asia.
Financial
As previously indicated, results for the period were impacted by
costs relating to the House of Fraser administration (GBP2.1
million) and an associated disruption to trade, a soft UK retail
environment and costs to launch Mulberry Korea (GBP2.5 million).
The Group's underlying loss for the period is GBP3.6 million (2017:
GBP0.6 million). After accounting for House of Fraser provisions
and Korea launch costs noted above, the loss before tax is GBP8.2
million (2017: GBP0.6 million).
Gross margin for the period was maintained at 61.5% (2017:
61.5%).
Operating expenses (net) increased to GBP50.4 million (2017:
GBP46.8 million) primarily due to Korea marketing costs (GBP1.7
million) and provisions for House of Fraser (GBP2.1 million).
The Group had net cash balances at 30 September 2018 of GBP12.1
million (2017: GBP16.4 million).
Capital expenditure for the period was GBP4.3 million (2017:
GBP2.1 million), including GBP3.0 million on stores (including
Digital), GBP0.7 million on IT systems and GBP0.3 million on
factories.
Inventories increased to GBP47.1 million at 30 September 2018
(2017: GBP45.8 million) reflecting the absorption of the Asian
businesses.
2. CURRENT TRADING AND OUTLOOK
Retail Sales
Retail sales continue to reflect a challenging UK environment
with an encouraging trend in International.
Group Retail LFL sales were down 8% for the 6 weeks to 3
November 2018, due to a high representation of UK within the mix.
Global Digital Retail sales, excluding House of Fraser Digital
sales this year and last year, were up 8%. Total Retail sales are
not considered to be representative due to the change in timing of
the UK press sale during the period.
UK Retail LFL sales, excluding House of Fraser, were down 7% on
last year, reflecting a continuation of a weak UK Retail
environment.
International Retail sales have grown in line with management's
expectations and have increased by 25% due to the acquisition of
stores and the selective expansion of the network during the
period. International Retail LFL sales performance is not
considered to be reflective of the current store portfolio given
the significant changes relative to the prior year period.
Retail like-for-like sales* Retail total sales***
This year vs. last year (%) 26 weeks to 30-Sep 6 weeks to 3-Nov 2018 26 weeks to 30-Sep 6 weeks to 3-Nov 2018
2018 2018
---------------------------- ------------------- ---------------------- ------------------- ----------------------
UK Retail** -7% -7% -11% -22%
International Retail** -1% -14% +13% +25%
Group Retail total -6% -8% -6% -11%
---------------------------- ------------------- ---------------------- ------------------- ----------------------
* LFL is defined as the year-on-year change in sales from stores
which have been trading for 12 months after the store opening.
Like-for-like sales exclude House of Fraser from mid-August both
this year and last year.
** Regional splits include Digital sales
*** Total UK Retail sales include a press sale held during
October 2017 which did not occur during the corresponding period
this year.
UK
As has been widely reported, the UK retail environment has
remained very challenging. The Group's UK business continues to
experience significantly softer trade at House of Fraser following
the previously reported administration, weaker UK consumer demand
and lower tourist footfall.
Furthermore, the Group's UK business has experienced a sustained
period of increase in rent and business rates over the last five
years.
The Group has agreed to convert the wholesale business with John
Lewis & Partners to a concession basis with effect from Winter
2018/19. This will enhance the direct to consumer reach of the
brand in the UK market, in particular the Digital and omni-channel
experience. As a result of this change, an estimated one-off charge
of GBP1.4 million will be incurred during the second half of the
current financial year to adjust the value of stock purchased from
John Lewis & Partners.
Further, an agreement has been reached with Sports Direct
International plc to operate the House of Fraser business on a
rolling basis in the medium term.
The Group remains committed to its UK manufacturing base and UK
store network. The recently opened Regent Street store and the
relocated Heathrow Terminal 4 store both showcase the Group's new
Mulberry store concept.
The Group continues to invest in the ongoing development of the
Digital and omni-channel experience.
International
The Group will continue to invest in International development
following the creation of three important subsidiaries in Asia.
Mulberry Asia, comprising China, Hong Kong and Taiwan,
transitioned from Wholesale to Retail during March 2018. Retail
sales during the financial year ending 31 March 2019 will reflect a
full year of trading for these markets. The network across these
markets consists of a total of 6 stores.
The establishment of Mulberry Japan was completed during May
2018. Five stores were transferred to Mulberry Japan and revenue
has transitioned from Wholesale to Retail from May 2018. Since the
end of the period under review, a further two stores have been
opened in Nihonbashi Mitsukoshi and Mitsui Outlet Park Kisarazu,
increasing the total network in Japan to 7 stores.
Mulberry Korea was established during August 2018, from which
date 18 stores were transferred to the Group's Retail network.
Since the end of the period under review, a new duty free store has
opened in Seoul, increasing the network in South Korea to 19
stores.
In line with the Group's strategy, the business in North America
and Europe has been refocused including a rebasing of the store
networks. This has reduced the operating cost of these operations.
The Group continues to believe in the long term growth
opportunities in these markets and will assess the potential to
selectively open new stores in strategic, high visibility locations
in the future while continuing to build Digital sales.
The Group anticipates that International sales will continue to
increase as a proportion of Group sales.
Digital and Omni-channel
Mulberry has a sector leading Digital and Omni-channel offering
and further enhancements are planned.
In Digital, localised mulberry.com sites with enhanced customer
experiences and services are due to launch in China and Australia,
following the recent launch of local fulfilment in Japan.
Furthermore, the Group has established strategic Digital
partnerships with key players including Toplife, JD.com's luxury
digital platform, Secoo and VIP.com. Further Digital partnerships
are planned in key strategic markets.
Selective Wholesale and Franchise
While Retail revenue will be increased, wholesale revenue during
the second half of the financial year ending 31 March 2019 will be
reduced by the following factors:
-- Mulberry Asia: Transfer of the business in China from Wholesale to Retail from March 2018
-- Mulberry Japan: Transfer of the business in Japan from Wholesale to Retail from May 2018
-- Mulberry Korea: Transfer of the business in Korea from Wholesale to Retail from August 2018
-- UK: Conversion of the existing wholesale business with John
Lewis & Partners from Wholesale to Retail on a concession basis
from Winter 2018/19
Capital expenditure
The new design concept for the Group's stores has been revealed
with the new Regent Street store and has since been rolled out to
the store in Heathrow Terminal 4. The roll out across the global
store network will continue during the second half of the financial
year and beyond, leading to increased capital expenditure during
the current financial year and in coming years.
Capital expenditure for the full year ending 31 March 2019 is
expected to be in the region of GBP8.0 million (2018: GBP5.4
million), of which the majority will be on stores.
FY outlook
The Group anticipates an underlying profit before tax for the
year ending 31 March 2019, excluding one-off costs, despite a
challenging first half period. Due to the normal seasonality of the
business, the majority of the Group's earnings are achieved in the
second half of the financial year.
One-off costs for the full year are expected to total
approximately GBP6.0 million, reflecting the effects of the House
of Fraser administration (GBP2.1 million) and the costs to launch
Mulberry Korea (GBP2.5 million) during the first half of the year,
and costs to set up the new concession business with John Lewis
& Partners (GBP1.4 million) during the second half of the
year.
3. STRATEGY UPDATE
The Group has made good progress with its strategy to grow
Mulberry as a global luxury brand. A strategic review which
followed the appointment of the new management team three years ago
highlighted the Group's competitive advantages but recognised its
overdependence on the UK market.
The key findings of the review were as follows:
1. The Group was very successful in the UK and was estimated to
have a 10% market share of the luxury handbag market. While this
gave the Group a profitable base, it was exposed to a downturn in
the UK.
2. The Group's subsidiaries controlled its operations in North
America and Europe but it was working through distributors in Asia.
While the USA and Europe were considered to have good long term
potential, the largest potential for growth in the medium term was
in Asia and with Asian customers visiting the Group's stores around
the world.
3. The Group was a leader in digital sales and marketing, giving
it a strong competitive advantage. However, it was difficult to
exploit this advantage in the key Asian markets through a
distributor network.
Significant progress has been made during the last three years
in a number of key areas as follows:
-- Digital and Omni-channel: The Digital Retail business has
grown from 12% to 17% of sales through mulberry.com. Adding the
Digital sales of Mulberry products sold through wholesale partners,
the Group estimates the penetration of Digital sales on total brand
sales ("grossing" up Wholesale to Retail) is approximately 20%.
This has been achieved through the consistent investment in the
Group's global Digital and Omni-channel platform, including best in
class software platforms such as Hybris and Salesforce. In
addition, Digital concessions with strategic partners have been
introduced (JD.com, Secoo, Vip.com), enabling the Group to broaden
its customer reach and localise its service offering, particularly
across new and high growth territories such as China.
-- Marketing and Brand: The Group has adopted an integrated
marketing approach which couples new and traditional formats with
extensive use of digital and social media. As part of this, a new
format for the Group's seasonal collection launches was introduced
to reinforce its customer-centric business strategy and enhance the
customer experience. Two customer events have been held to date, in
London and Seoul, offering an instantly shoppable, real-time global
consumer experience. In addition, the Group continues to develop
its Somerset-based customer service operations, including further
investment in its aftercare and lifetime service.
-- Product: A renewed focus on creativity and innovation under
the creative direction of Johnny Coca has led to new bestsellers
being established (e.g. Amberley, Zipped Bayswater) and iconic
ranges, such as the Bayswater family, being revitalised to reflect
a new and more modern aesthetic. Whilst leather goods have remained
the core commercial focus, complementary lifestyle categories,
including shoes, ready-to-wear, soft accessories and jewellery,
have been further developed and enhanced.
-- UK: The Group has continued to invest in the UK and ensure it
continues to meet the needs of both its domestic and International
customers in its home market. This has consisted of maintaining a
relevant and balanced presence across high visibility city centre
locations, department stores (primarily through a concession
model), airports and selective outlets. Most recently, the Group
has introduced the Mulberry concept in the new flagship store on
Regent Street, which features design elements that represent the
brand's distinctive British heritage. The concept introduces
advanced technology features, including an innovative
customer-facing mobile point of sale which has enabled traditional
EPOS tills to be completely removed and created an enhanced
customer experience in store.
-- Asia Pacific: The Group has taken management control of the
key Asian markets with a controlling stake in subsidiaries in
China, Hong Kong, Taiwan, Japan and South Korea. Head offices have
been established in Hong Kong, Tokyo and Seoul with the businesses
in the process of being integrated with Group merchandising,
marketing and Digital systems. Since March 2018, the Group has
increased the Retail store network in Asia Pacific (including Japan
and Korea) from 1 store to 32 stores (as at 3 November 2018) and
launched the local Digital platform in Japan.
-- North America and Europe: The operations in North America and
Europe have been refocused and operating costs have been reduced.
This has been achieved by the selective closure of stores across
the network that were deemed no longer strategic. In the United
States, distribution has started with Nordstrom for the sale of
Mulberry products in select locations and via Nordstrom.com. Local
fulfilment for the mulberry.com platform has been introduced.
-- UK Manufacturing: The Group has remained committed to its
"Made in England" strategy, with continued investment and
development of the two UK factories in Somerset. These factories
manufacture approximately 50% of bags, reinforcing the authenticity
of the Mulberry brand and, at a practical level, contributing to
the attainment of high product quality standards. A specialist
Artisan Studio was created within each of the two factories,
showcasing the Group's distinctive British craftsmanship on special
and limited edition products.
The Group considers that revenue growth is the key performance
indicator.
Key Opportunities
Looking forward the Group continues to maintain four core
strategic pillars:
1. International development with focus on Asia Pacific: The
Group will continue to build the International business with a
particular focus on Asia Pacific. Through the recently established
Asian subsidiaries, the Digital and omni-channel network will be
further developed and enhanced with select store openings in high
visibility and high traffic locations, the roll out of omni-channel
services and the expansion of the newly introduced Digital
concession model. North America and Europe will continue to be
refined to improve ROI and providing a base for long term
growth.
2. Direct to customer model: The Group plans to continue to
invest in Digital and Omni-channel and its global store network to
further develop its direct to customer model. As previously
indicated, a new agreement has been reached with John Lewis &
Partners to open 19 concessions, including Digital, from Winter
2018/19. Following the recent launch of local fulfilment in Japan,
mulberry.com sites with enhanced and localised customer experiences
are due to launch in other markets such as China and Australia. The
recently established Digital concession model will be further
developed with new partnerships. The global roll out of the new
Mulberry store concept will introduce innovative, customer-facing
technology features to further enhance the in-store experience.
3. Product: The Group will continue its creative programme of
introducing distinctive leather goods with an accessible luxury
positioning for women and men whilst further enhancing and
developing complementary lifestyle products. As previously
indicated, the Group recently signed a license agreement with De
Rigo for Mulberry eyewear which will be distributed through
selective opticians and across the Mulberry network from Spring
2019.
4. UK Manufacturing: The Group will continue to maintain its
distinctive "Made in England" positioning through further
enhancement of its two UK factories in Somerset. Investment in the
most advanced technology will continue to ensure high productivity
levels are maintained. In addition, the Group will continue to run
an extensive apprentice programme to develop the next generation of
craftspeople. The Group expects its UK factories to continue to
manufacture approximately 50% of handbags.
Whilst the current sales environment is challenging, management
is confident that the right strategy is in place to deliver value
to shareholders over the longer term. This is supported by a
compelling product range, a strategic global store and Digital
network and a distinctive brand positioning.
CONSOLIDATED INCOME STATEMENT
six monthsED 30 september 2018
Note Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 GBP'000 September 2017 GBP'000 31 March 2018
GBP'000
Revenue 68,336 74,576 169,718
Cost of sales (26,341) (28,678) (62,000)
Gross profit 41,995 45,898 107,718
Operating expenses (50,398) (46,817) (101,464)
Other operating income 209 245 482
Operating (loss)/profit (8,194) (674) 6,736
Share of results of
associates 42 60 114
Finance income 28 12 96
Finance expense (53) (7) (29)
(Loss)/profit before tax (8,177) (609) 6,917
Tax credit/(charge) 4 2,877 261 (2,011)
(Loss)/profit for the period (5,300) (348) 4,906
Attributable to:
Equity holders of the parent (3,904) 382 6,391
Non-controlling interests (1,396) (730) (1,485)
(Loss)/profit for the period (5,300) (348) 4,906
Basic (loss)/earnings per
share 6 (8.9p) (0.6p) 8.3p
Diluted (loss)/earnings per
share 6 (8.9p) (0.6p) 8.2p
All activities arise from continuing operations.
Reconciliation of adjusted (loss)/profit before tax
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 GBP'000 September 2017 GBP'000 31 March 2018
GBP'000
(Loss)/profit before tax (8,177) (609) 6,917
Exceptional items:
Impairment relating to retail
property, plant and
equipment - - 387
Store closure costs - - 675
House of Fraser provisions 2,073 - -
Adjusted (loss)/profit before
tax - non-GAAP measure (6,104) (609) 7,970
Adjusted basic
(loss)/earnings per share 6 (6.1p) (0.6p) 10.0p
Adjusted diluted
(loss)/earnings per share 6 (6.1p) (0.6p) 10.0p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
six monthsED 30 september 2018
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 GBP'000 September 2017 GBP'000 31 March 2018
GBP'000
(Loss)/profit for the period (5,300) (348) 4,906
Items that may be
reclassified subsequently to
profit or loss;
Exchange differences on
translation of foreign
operations 576 31 (447)
Gains/(losses) on a hedge
of a net investment taken
to equity 119 35 (115)
Income tax relating to
items that may be
reclassified subsequently
to profit or loss (131) (12) 107
Total comprehensive
(expense)/income for the
period (4,736) (294) 4,451
Attributable to:
Equity holders of the parent (3,340) 436 6,031
Non-controlling interests (1,396) (730) (1,580)
(4,736) (294) 4,451
CONSOLIDATED BALANCE SHEET
AT 30 SEptember 2018
Unaudited 30 September 2018 Unaudited 30 September 2017 Audited
GBP'000 GBP'000 31 March 2018
GBP'000
Non-current assets
Intangible assets 12,552 10,567 10,362
Property, plant and equipment 25,160 22,571 21,971
Interests in associates 280 234 306
Deferred tax asset 1,984 1,568 1,782
39,976 34,940 34,421
Current assets
Inventories 47,099 45,771 44,647
Trade and other receivables 12,910 16,861 15,196
Current tax asset 3,383 727 -
Cash and cash equivalents 13,179 16,367 25,071
76,571 79,726 84,914
Total assets 116,547 114,666 119,335
Current liabilities
Trade and other payables (31,730) (29,275) (30,199)
Current tax liabilities - - (893)
Borrowings (1,112) - -
Total liabilities (32,842) (29,275) (31,092)
Net assets 83,705 85,391 88,243
Equity
Share capital 3,001 3,001 3,001
Share premium account 11,961 11,961 11,961
Own share reserve (1,387) (1,396) (1,388)
Capital redemption reserve 154 154 154
Cashflow hedge reserve - 24 (98)
Foreign exchange reserve 1,167 1,088 701
Retained earnings 69,269 70,384 73,165
Equity attributable to holders
of the parent 84,165 85,216 87,496
Non-controlling interests (460) 175 747
Total equity 83,705 85,391 88,243
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
six monthsED 30 september 2018
Share Own Capital Cashflow Foreign Non-controlling
Share premium share redemption hedge exchange Retained Total interest Total
capital account reserve reserve reserve reserve earnings GBP'000 GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2017 3,000 11,961 (1,461) 154 (5) 1,063 69,957 84,669 975 85,644
Profit/(loss) for the
period - - - - - - 382 382 (730) (348)
Other comprehensive
income for the
period - - - - 29 25 - 54 - 54
Total comprehensive
income/(expense) for
the period - - - - 29 25 382 436 (730) (294)
Issue of share
capital 1 - - - - - - 1 - 1
Charge for employee
share-based payments - - - - - - 493 493 - 493
Exercise of share
options - - - - - - (448) (448) - (448)
Own shares - - 65 - - - - 65 - 65
Adjustment arising
from movement in
non-controlling
interest - - - - - - - - (70) (70)
As at 30 September
2017 3,001 11,961 (1,396) 154 24 1,088 70,384 85,216 175 85,391
Profit/(loss) for the
period - - - - - - 6,009 6,009 (755) 5,254
Other comprehensive
expense for the
period - - - - (122) (387) - (509) - (509)
Total comprehensive
(expense)/income for
the period - - - - (122) (387) 6,009 5,500 (755) 4,745
Charge for employee
share-based payments - - - - - - (202) (202) - (202)
Exercise of share
options - - - - - - (57) (57) - (57)
Own shares - - 8 - - - - 8 - 8
Adjustments arising
from movement in
non-controlling
interest - - - - - - - - 1,327 1,327
Dividends paid - - - - - - (2,969) (2,969) - (2,969)
As at 31 March 2018 3,001 11,961 (1,388) 154 (98) 701 73,165 87,496 747 88,243
Loss for the period - - - - - - (3,904) (3,904) (1,396) (5,300)
Other comprehensive
income for the
period - - - - 98 466 - 564 - 564
Total comprehensive
profit/(loss) for
the period - - - - 98 466 (3,904) (3,340) (1,396) (4,736)
Charge for employee
share-based payments - - - - - - 9 9 - 9
Exercise of share
options - - - - - - (1) (1) - (1)
Own shares - - 1 - - - - 1 - 1
Adjustments arising
from movement in
non-controlling
interest - - - - - - - - 189 189
As at 30 September
2018 3,001 11,961 (1,387) 154 - 1,167 69,269 84,165 (460) 83,705
CONSOLIDATED CASH FLOW STATEMENT
six monthsED 30 september 2018
Unaudited six months to 30 September Restated* Restated*
2018 GBP'000 unaudited audited
six months year ended
to 30 September 31 March
2017 2018
GBP'000 GBP'000
Operating (loss)/profit for the period (8,194) (674) 6,736
Adjustments for:
Depreciation and impairment of property,
plant and equipment 2,745 3,060 6,124
Amortisation of intangible assets 555 879 1,796
Loss/(profit) on sale of property, plant
and equipment 68 (2) 13
Share-based payments charge 9 493 291
Operating cash flows before movements in
working capital (4,817) 3,756 14,960
Decrease/(increase) in inventories 436 (1,384) (464)
Decrease/(increase) in receivables 2,450 (3,601) (2,059)
(Decrease)/increase in payables (716) 382 1,571
Cash (used in)/generated by operations (2,647) (847) 14,008
Income taxes paid (1,732) (1,803) (2,553)
Interest paid (53) (7) (29)
Net cash (outflow)/inflow from operating
activities (4,432) (2,657) 11,426
Investing activities:
Interest received 28 12 96
Purchases of property, plant and
equipment (3,488) (1,640) (4,689)
Proceeds from disposal of property, plant
and equipment 43 22 53
Acquisition of intangible fixed assets (1,233) (442) (1,605)
Acquisition of subsidiary (6,175) (1,629) (1,629)
Net cash (used in) investing activities (10,825) (3,677) (7,774)
Financing activities:
Dividends paid - - (2,969)
Proceeds on issue of shares - 1 1
Increase in related party loan 1,765 936 1,385
Investment from non-controlling interest 173 1,323 2,675
New borrowings 1,112 - -
Settlement of share awards (1) (448) (505)
Net cash used in financing activities 3,049 1,812 587
Net (decrease)/increase in cash and cash
equivalents (12,208) (4,522) 4,239
Cash and cash equivalents at beginning of
period 25,071 21,093 21,093
Effect of foreign exchange rate changes 316 (204) (261)
Cash and cash equivalents at end of
period 13,179 16,367 25,071
* The cash flow in relation to investment from non-controlling
interest has been restated to reflect that the nature of the cash
flow is in relation to financing activities, rather than investing
activities where it was previously disclosed.
Notes to the condensed financiAL statements
SIX MONTHSED 30 SEPTEMBER 2018
1. GENERAL INFORMATION
Mulberry Group plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The half year results and
condensed consolidated financial statements for the six months
ended 30 September 2018 (the interim financial statements) comprise
the results for the Company and its subsidiaries (together referred
to as the Group) and the Group's interest in associates.
The information for the year ended 31 March 2018 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the Auditor drew attention by way
of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
The interim financial statements for the six months ended 30
September 2018 have not been reviewed or audited.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies and methods of computation followed in
the interim financial statements are consistent with those as
published in the Group's Annual Report and Financial Statements for
the year ended 31 March 2018.
At the date of approval of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
-- IFRS 16: Leases;
-- IFRS 10 and IFRS 28 (amendments) : Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture;
-- IFRIC 23 : Uncertainty over Income Tax Treatments
IFRS 16 introduces a comprehensive model for the identification
of lease arrangements and accounting treatments for both lessors
and lessees. IFRS 16 will supersede the current lease guidance
including IAS 17 Leases and the related interpretations when it
becomes effective for accounting periods beginning on or after 1
January 2019. The Group currently expects to adopt IFRS 16 for the
year ending 31 March 2020. No decision has been made about whether
to use any of the transitional options in IFRS 16.
IFRS 16 distinguishes leases and service contracts on the basis
of whether an identified asset is controlled by a customer.
Distinctions of operating leases (off balance sheet) and finance
leases (on balance sheet) are removed for lessee accounting, and is
replaced by a model where a right-to-use asset and a corresponding
liability have to be recognised for all leases by lessees (i.e. all
on balance sheet except for short-term leases and leases of low
value assets).
The right-to-use asset is initially measured at cost and
subsequently measured at cost (subject to certain exceptions) less
accumulated depreciation and impairment losses, adjusted for any
remeasurement of the lease liability. The lease liability is
initially measured at the present value of the lease payments that
are not paid at that date. Subsequently, the lease liability is
adjusted for interest and lease payments, as well as the impact of
lease modifications, amongst others. Furthermore, the
classification of cash flows will also be affected because
operating lease payments under IAS 17 are presented as operating
cash flows; whereas under the IFRS 16 model, the lease payments
will be split into a principal and an interest portion which will
be presented as financing and operating cash flows respectively.
Furthermore, extensive disclosures are required by IFRS 16.
As at 31 March 2018, the Group had non-cancellable operating
lease commitments of GBP138.1 million. IAS 17 does not require the
recognition of any right-to-use asset or liability for future
payments for these leases; instead, certain information is
disclosed as operating lease commitments. A preliminary assessment
indicates these arrangements will meet the definition of a lease
under IFRS 16 and hence the Group will recognise a right-to-use
asset and a corresponding liability in respect of all these leases
unless they qualify for low value or short-term leases upon the
application of IFRS 16. The new requirement to recognise a
right-to-use asset and a related lease liability is expected to
have a significant impact on the amounts recognised in the Group's
consolidated financial statements and the Directors are currently
assessing its potential impact. It is not practicable to provide a
reasonable estimate of the financial effect until the Directors
complete the review.
Except for IFRS 16, the Directors do not expect that the
adoption of the Standards listed above will have a material impact
on the financial statements of the Group in future periods. Beyond
the information above, it is not practicable to provide a
reasonable estimate of the effect of these Standards until a
detailed review has been completed.
The Annual Report and Financial Statements are available from
the Group's website (www.mulberry.com) or from the Company
Secretary at the Company's registered office, The Rookery,
Chilcompton, Bath, England, BA3 4EH.
3. GOING CONCERN
The Directors have considered the use of the going concern basis
in the preparation of the financial statements given the
uncertainty around the current economic climate within the retail
market. The Directors have considered the financial position of the
Mulberry Group, the Group forecasts, taking account of reasonable
possible changes in trading performance and the availability of
external finance. On 27 September 2018, Mulberry Group plc signed a
new GBP10.0 million revolving credit facility with HSBC until
October 2021. As a consequence the Directors believe that the Group
is well placed to manage its business risks successfully.
After making enquiries, and reviewing the Mulberry Group plc
forecasts which cover a period exceeding 12 months from the date of
signature of the financial statements, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future,
taking into account reasonably possible changes in trading.
Accordingly, they have adopted the going concern basis in preparing
the half year results.
4. TAXATION
The tax credit is calculated by applying the forecast full year
effective tax rate to the interim loss and calculating the deferred
tax balance for the period.
5. DIVID
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 GBP'000 September 2017 GBP'000 31 March 2018
GBP'000
Dividend of 5p per ordinary
share paid during the period - - 2,969
The final dividend for the year ended 31 March 2018 will be paid
to shareholders on 22 November 2018.
The final dividend for the year ended 31 March 2017 was paid on
23 November 2017.
6. EARNINGS PER SHARE ('EPS')
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 September 2017 31 March 2018
Basic (loss)/earnings per
share (8.9p) (0.6p) 8.3p
Diluted (loss)/earnings per
share (8.9p) (0.6p) 8.2p
Adjusted basic (loss)/earnings
per share (6.1p) (0.6p) 10.0p
Adjusted diluted
(loss)/earnings per share (6.1p) (0.6p) 10.0p
Earnings per share is calculated based on the following
data:
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 September 2017 31 March 2018
(Loss)/profit for the period
for basic and diluted
earnings per share (5,300) (348) 4,906
Adjustments to exclude
exceptional items:
Impairment relating to retail
assets - - 378
Loss on disposal of retail
stores - - 675
House of Fraser 1,679 - -
Adjusted (loss)/profit for the
period for basic and diluted
earnings per share (3,621) (348) 5,959
Unaudited six months to 30 Unaudited six months to 30 Audited year ended
September 2018 Million September 2017 Million 31 March 2018
Million
Weighted average number of
ordinary shares for the
purpose of basic EPS 59.4 59.4 59.4
Effect of dilutive potential
ordinary shares: share
options 0.3 0.1 0.2
Weighted average number of
ordinary shares for the
purpose of diluted EPS 59.7 59.5 59.6
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGGQUGUPRGBQ
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