Burberry Regulatory News (BRBY)

16 November 2023

BURBERRY GROUP PLC

INTERIM RESULTS FOR 26 WEEKS ENDED 30 SEPTEMBER 2023

 "We made good progress against our strategic goals, executing our priorities at pace. We continued to build momentum around our new creative vision with the launch of our Winter 23 collection in September, the first designed by Daniel Lee. While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets."

- Jonathan Akeroyd, Chief Executive Officer

*See page 11 for definitions of alternative performance measures, ** Not meaningful

· Q2 comparable store sales increased 1%, with EMEIA +10%, Asia Pacific +2%, Americas -10%

· Significant progress on our plan, executing our priorities at pace

· Good performance across core outerwear and leather goods categories

o Outerwear comparable store sales up 21% in H1 and 10% in Q2

o Leather goods comparable store sales up 8% in H1 and 3% in Q2

· Delivered a more coherent brand aesthetic with campaigns generating significantly improved brand clarity, supported by a series of high-impact activations

· Launched Winter 23 collection, broadening distribution and ensuring greater visibility in stores compared with previous seasons; new product complements core offer and early indicators are encouraging

· Continued investment in distribution, opening or refurbishing 33 stores in the half and refreshed website in line with our new creative vision

· Achieved efficiency improvements across the value chain in terms of product availability, on time delivery and material waste re-use

· Strengthened supply chain with the completion of an outerwear acquisition in Italy in early October

· £400m share buyback completed at end of October, with £200m completed in H1

· Interim dividend of 18.3p, +11% based on 30% of FY23 full year dividend

GUIDANCE

We are confident in our strategy and remain committed to achieving our medium and long-term targets. The slowdown in luxury demand globally is having an impact on current trading. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24*. In this context, adjusted operating profit would be towards the lower end of the current consensus range (£552m-£668m)**.

Based on the effective foreign exchange rates as of 25 October 2023, we now expect a reduced currency headwind of c.£110m to revenue and c.£60m to adjusted operating profit.

*High single-digit revenue CAGR from FY20 base equating to a low double-digit growth in FY24 YoY.

** As published on our corporate website here.

All metrics and commentary in the Group Financial Highlights and Business and Financial Review exclude adjusting items unless stated otherwise.

The financial information contained herein is unaudited.

The following alternative performance measures are presented in this announcement: CER, adjusted profit measures, comparable sales, free cash flow, cash conversion, adjusted EBITDA and net debt. The definitions of these alternative performance measures are in the Appendix on page 11.

Certain financial data within this announcement have been rounded. Growth rates and ratios are calculated on unrounded numbers.

Enquiries

· There will be a virtual presentation for investors and analysts today at 9.30am (UK time) that can be viewed live on the Burberry website https://www.burberryplc.com/ and can also be accessed live via a listen only dial-in facility, click here to register

· The supporting slides and an indexed replay will be available on the website later in the day

· Burberry will issue its Third Quarter Trading Update on 19 January 2024

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. Burberry Group plc undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. Nothing in this announcement should be construed as a profit forecast. All persons, wherever located, should consult any additional disclosures that Burberry Group plc may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index. ADR symbol OTC:BURBY.

BURBERRY, the Equestrian Knight Device, the Burberry Check, and the Thomas Burberry Monogram and Print are trademarks belonging to Burberry.

www.burberryplc.com

LinkedIn: Burberry

BUSINESS REVIEW

In November 2022, we set out our strategy to realise Burberry's potential as the modern British luxury brand with a medium-term target to grow sales to £4bn and a longer-term ambition to reach £5bn. During the half, we made significant progress against our plan, executing our priorities at pace.

We continued to invest in our creative vision with campaigns and activations that were recognisably Burberry and told a coherent brand story. Our Winter 23 campaign showcased our new offer with a distinctive visual language that celebrated our new and enduring brand codes and placed product centre stage. The strong level of interest from fashion editors globally led to higher volumes of editorials with more than two times the reach of our previous Winter campaign.

We complemented the launch of Winter 23 with a series of city takeovers in high-impact locations. Our "Burberry Streets" activations in London, Seoul and Shanghai celebrated the art of exploration and brought our brand to life through immersive experiences, installations and events. These initiatives contributed to our highest level of brand clarity in the last three years as well as continued growth in consumers who associate Burberry with 'Britishness' and 'Heritage', which are key to our luxury positioning.

In terms of our core product categories, outerwear comparable store sales increased 21% in the half. This was driven by the strong performance of Heritage rainwear across both men's and women's. Leather goods comparable store sales advanced 8%, led by 14% growth in bags with ongoing momentum in icons such as the Vintage Check and new shapes introduced for Winter 23 such as the Knight bag and Trench tote gaining traction. In parallel, we continued to expand and evolve ready-to-wear, and introduced a more complete shoe offering.

The Winter 23 collection, the first designed by Daniel Lee, arrived in stores in September. Across all categories, we supported the launch with a higher level of investment in new product than in previous seasons, enabling us to broaden distribution and ensure greater visibility in our stores. The new product complements our existing strong core offer and while it is still too soon to have an in-depth read on commercial performance, the early indicators are encouraging.

We continued to build on this momentum with our Summer 24 show, also in September, that was well attended by high profile talent from the worlds of music, creative arts and sports. Through the collection, we further developed the aesthetic and codes for the brand across leather goods, shoes and ready-to-wear. The response has been highly positive with global reach from press coverage more than doubling season on season.

In addition, our beauty business generated an excellent performance in the half, driven by the successful launch of our latest fragrance Burberry Goddess.

We continued to invest in distribution, opening or refurbishing 33 stores in the half including New Bond Street London, Rodeo Drive Los Angeles and Omotesando Tokyo. Financials of the updated stores continue to show both store productivity and AUR up mid-teens percentage against equivalent existing stores. We also refreshed our e-commerce website Burberry.com. Launched to coincide with the arrival of our Winter 23 collection in stores, the website offers customers a more elevated and cohesive experience aligned with our new brand identity.

We further strengthened our supply chain in our core product categories with completion in early October of the acquisition of a product development business from our longstanding supplier Pattern SpA. This strategic investment will enhance our technical outerwear capabilities and give us greater control over the quality, cost, delivery, and sustainability of our offer.

At the same time, we maintained support for our communities, partnering with Tate Britain for 'Sarah Lucas: HAPPY GAS', an exhibition honouring one of Britain's leading artists. We also partnered with British artist Keith Khan and LEEDS 2023 to create a series of bespoke textile artworks at the Burberry Mill in Keighley to celebrate the 33 distinctive and diverse wards of the city of Leeds.

We continued to progress our sustainability agenda, introducing plastic-free packaging as part of our commitment to eliminate plastic from our consumer packaging by FY26. We also expanded our aftercare services to help more of our customers extend the life of their products.

SUMMARY INCOME STATEMENT

*Excludes adjusting items. All items below adjusting operating items are on a reported basis unless otherwise stated.

For detail, see Appendix.

FINANCIAL PERFORMANCE

Revenue by channel

In the half:

· Retail sales grew 10% at CER; 6% reported

· Comparable store sales grew 10% with no impact from space

Comparable store sales growth by region

Asia Pacific grew 18% in the half with a strong Q1 recovery of 36% against a period that saw COVID-19 related disruption in Mainland China and slowed to 2% in Q2 against a tougher comparative.

· Mainland China comparable store sales increased 15% in the half. Q2 fell 8% as spending shifted offshore with the Chinese customer group growing 25%

· South Korea fell 1% in the half with a robust 6% growth in Q1 offset by a 7% decline in Q2

· Japan saw strong comparable store sales growth up 43% in the half and 41% in Q2 driven by tourists

· South Asia Pacific rose 30% in the half and 22% in Q2, also benefitting from tourist demand

EMEIA had another strong half with comparable store sales up 14%, and Q2 +10%.

· The region benefitted from tourist growth of 39% for the half with the share of mix from tourists increasing to 51% of retail sales with a strong performance from American and Asian tourists

· Continental Europe outperformed the regional average in the half

· UK continued to lag Continental Europe in attracting tourism spend compared with pre-pandemic levels, reflecting the withdrawal of VAT refunds in the UK since January 2021

Americas declined 9% in the half with Q2 -10%.

· While the American customer has remained weak overall, we are pleased with the progress made with our customer acquisition programme with an increased share of higher income female clients

By product

We maintained our focus on our core leather and outerwear categories.

· Outerwear comparable store sales grew 21% in the half and 10% in Q2, driven by Heritage rainwear following the launch of our new visual expression of Burberry

· Leather goods comparable store sales grew 8% in the half and 3% in Q2. This was driven by bags especially the Vintage Check line. The new bag pillars launched at the end of the period and are gaining traction, particularly the Knight bag and Trench tote

· Ready-to-wear excluding outerwear grew 6% in the half with men's up 6% and women's increasing 7%

Store footprint

The transformation of our distribution network continued during the half.

· Including refurbishments, we increased the number of updated stores by 33 in the half, bringing the total of stores in new design to 140

· We remain on track to complete more than 50% of the network by the end of this financial year

· Key openings/refurbishments include New Bond Street London, Rodeo Drive Los Angeles and Omotesando Tokyo

· We are pleased with the performance of updated stores that saw both store productivity and AUR higher by mid-teens compared with equivalent existing stores

Wholesale

Wholesale revenue decreased 8% at both CER and reported rates in the half driven by a weak Americas performance. We expect the full year to be down a mid-single digit percentage with the channel impacted by the macroeconomic environment.

Licensing

Licensing revenue grew 44% at CER and 45% at reported exchange rates in the half driven by a strong performance in beauty with the highly successful launch of the Burberry Goddess fragrance.

OPERATING PROFIT ANALYSIS

Adjusted operating profit

*Excludes adjusting items

Adjusted operating profit increased 1% at CER and but fell 6% at reported with the margin down 110bps and 180bps respectively:

· Gross margin increased by 30bps at CER with regional and channel mix benefits as well as lower transportation costs more than offsetting inflationary pressures, and fell 30bps at reported

· Adjusted net operating expenses rose by 10% at CER and 7% reported due to investments in stores and marketing as well as impact of inflation of people costs

· Adjusted operating profit was £223m at reported including a £17m foreign exchange headwind (H1 FY23: £238m at reported with £31m foreign exchange tailwind)

ADJUSTING ITEMS*

Adjusting items were nil (H1 FY23: £25m net credit).

*For detail on adjusting items see note 4 of the Financial Statements **Includes nil (H1 FY23: £1m credit) that has been recognised through COGS

ADJUSTED PROFIT BEFORE TAX*

After an adjusted net finance charge of £4m (H1 FY23: £12m), adjusted profit before tax was £219m (H1 FY23: £226m).

*For detail on adjusting items see note 4 of the Financial Statements

TAXATION*

The effective tax rate on adjusted profit increased to 27.2% (H1 FY23: 22.4%) due to the higher UK corporation tax rate. The reported tax rate on H1 FY24 profit before taxation was also 27.2% (H1 FY23: 22.7%).

*For detail see note 6 of the Financial Statements

CASH FLOW

Represented statement of cash flows

*For a definition of free cash flow see page 11

Free cash flow was a £15m outflow in the half (H1 FY23: £88m inflow) as we continued to invest in product and distribution.

The major components were:

· Cash generated from operating activities decreased from £289m to £271m

· A working capital outflow of £154m (H1 FY23: £125m) impacted by changes to the timing of our seasonal collections and the build of inventory in preparation for festive

· Capital expenditure of £89m (H1 FY23: £53m) attributed to the store network as we continued to roll out our store refurbishment programme

· Tax cash outflow of £98m (H1 FY23: £65m) due to the higher UK tax rate and one-off payments

Cash net of overdrafts on 30 September 2023 was £570m, compared to £961m on 1 April 2023. On 30 September 2023 borrowings were £299m from the bond issue leaving cash net of overdrafts and borrowings of £271m (1 April 2023: £663m). With lease liabilities of £1,158m, net debt in the period was £887m (1 April 2023: £460m). Net Debt/Adjusted EBITDA was 0.9x, at the upper end of our target range of 0.5x to 1.0x. The increase in leverage from 0.5x at the FY23 year-end was primarily driven by the share buyback programme, payment of the final dividend and seasonal working capital outflows as we approach the festive period.

*For a definition of net debt see page 12.

APPENDIX

Detailed guidance for FY24

Note: Guidance based on CER at FY23 rates

GUIDANCE

We are confident in our strategy and remain committed to achieving our medium and long-term targets. The slowdown in luxury demand globally is having an impact on current trading. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24*. In this context, adjusted operating profit would be towards the lower end of the current consensus range (£552m-£668m)**.

Based on effective foreign exchange rates as of 25 October 2023, we now expect a reduced currency headwind of c.£110m to revenue and c.£60m to adjusted operating profit.

*High single-digit revenue CAGR from FY20 base equating to a low double-digit growth in FY24

** As published on our corporate website here.

*Mix based on H1 FY24

*Excludes the impact of pop-up stores

*For detail on adjusting items see note 4 of the Financial Statements

*For detail on adjusting items see note 4 of the Financial Statements

Alternative performance measures

Alternative performance measures (APMs) are non-GAAP measures. The Board uses the following APMs to describe the Group's financial performance and for internal budgeting, performance monitoring, management remuneration target setting and external reporting purposes.

PRINCIPAL RISKS

At H1 FY24, the principal risks the Group faces for the remaining 26 weeks of the financial year have been reviewed relative to the prior year-end. The principal risk ratings are considered to be consistent with the year-end position. Details of the principal risks including definitions are set out in the FY23 Annual Report (p121- 144).

CONDENSED Group INCOME statement- UNAUDITED

1 Balances for the 52 weeks to 1 April 2023 have been audited.

1 Balances for the 52 weeks to 1 April 2023 have been audited.

2 All items included in other comprehensive income may subsequently be reclassified to profit and loss in a future period.

1 Balances as at 1 April 2023 have been audited.

1 Includes £201 million paid in relation to the first share buy-back programme which commenced and completed in period as well as £201 million included within payables related to the second share buy-back programme which commenced in the period and completed in the second half of the year. Refer to note 19.

1 Balances for the 52 weeks to 1 April 2023 have been audited.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Corporate information

Burberry Group plc and its subsidiaries (the Group) is a global luxury goods manufacturer, retailer and wholesaler. The Group also licenses third parties to manufacture and distribute products using the 'Burberry' trademarks. All of the companies which comprise the Group are controlled by Burberry Group plc (the Company) directly or indirectly.

2. Accounting policies and Basis of preparation

Basis of preparation

These condensed consolidated interim financial statements are unaudited but have been reviewed by the auditors and their report to the Company is set out on page 36. They were approved by the Board of Directors on 15 November 2023. These condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the 52 weeks to 1 April 2023 were approved by the Board of Directors on 17 May 2023 and have been filed with the Registrar of Companies. The report of the auditors on the statutory accounts for the 52 weeks to 1 April 2023 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

These condensed consolidated interim financial statements for the 26 weeks to 30 September 2023 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the UK. This report should be read in conjunction with the Group's financial statements for the 52 weeks to 1 April 2023, which have been prepared in accordance with UK-adopted International Accounting Standards (IFRS).

These condensed consolidated interim financial statements are presented in £m. Financial ratios are calculated using unrounded numbers.

Going concern

In considering the appropriateness of adopting the going concern basis in preparing the financial statements, the Directors have assessed the potential cash generation of the Group. This assessment covers the period of a minimum of 12 months from the date of signing the condensed consolidated interim financial statements. Therefore, the Directors have considered the forecast for the period up to the subsequent financial year end, the period ending 29 March 2025, for any indicators that the going concern basis of preparation is not appropriate.

The scenarios considered by the Directors include a severe but plausible downside reflecting the Group's base plan adjusted for severe but plausible impacts from the Group's principal risks, which are consistent with the principal risks at 1 April 2023. The scenarios were informed by a comprehensive review of macroeconomic scenarios using third party projections of macroeconomic data for the luxury fashion industry. The Group central planning scenario reflects a balanced projection with a continued focus on growing markets and maintaining momentum built as part of the strategy. As a sensitivity, this central planning scenario has been flexed to reflect a 15% downgrade to revenues in the 18 month period to March 2025, in comparison to the base case, as well as the associated consequences for EBITDA and cash. Management consider this represents a severe but plausible downside scenario appropriate for assessing going concern.

The severe but plausible downside modelled the following risks occurring simultaneously:

? A more severe and prolonged reduction in the GDP growth assumptions in Europe, China, and the Americas compared to the central planning scenario

? An increase in geopolitical tension which reduces GDP growth assumptions compared to the central planning model

? A severe reduction to our global consumer demand arising from a change in consumer preference

? A significant reputational incident such as negative sentiment propagated through social media

? The impact of a business interruption event, following a technology vulnerability, resulting in a two week interruption in one of our geographies arising from the supply chain impact, and interruption to one of our channels

? The occurrence of a one-time physical risk relating to climate change in FY 2024/25 and the materialisation of a severe but plausible ongoing market risk relating to climate change in line with a scenario reflecting a 2°C global temperature increase compared to pre-industrial levels

? The payment of a settlement arising from a regulatory or compliance-related matter

? A short term impact of a 10% weakening in a key non-sterling currency for the Group before it is recovered through price adjustment

Further mitigating actions within management control would be taken under the severe but plausible scenario, including working capital reduction measures and limiting capital expenditure or inorganic acquisition spend, but these were not incorporated into the downside modelling.

The Directors have also considered the Group's current liquidity and available facilities. As at 30 September 2023, the Group balance sheet reflects cash net of overdrafts is £570 million. In addition the Group has access to a £300 million Revolving Credit Facility (RCF), which is currently undrawn and not relied upon for the purpose of this going concern assessment. The Group is in compliance with the covenants for the RCF and the borrowings raised via the sustainability bond are not subject to covenants. Details of cash, overdrafts, borrowings and facilities are set out in notes 14, 17 and 18 of these financial statements.

In all the scenarios assessed, taking into account liquidity and available resources and before the inclusion of any mitigating actions within management control, the Group was able to maintain sufficient liquidity to continue trading, having considered the going concern period up to 29 March 2025. On the basis of the assessment performed, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements for the period ended 30 September 2023.

Accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the 52 weeks ended 1 April 2023.

Several standards and amendments apply for the first time for the period ended 30 September 2023, but do not have a material impact on the condensed consolidated interim financial statements of the Group. The Group has not early adopted any standard, interpretation or amendment that has been issues but is not yet effective.

Key sources of estimation uncertainty

Preparation of the condensed consolidated interim financial statements in conformity with IFRS requires that management make certain estimates and assumptions that affect the measurement of reported revenues, expenses, assets and liabilities and the disclosure of contingent liabilities.

If in the future such estimates and assumptions, which are based on management's best estimates at the date of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be updated as appropriate in the period in which the circumstances change.

Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas where the estimates and assumptions applied have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are consistent with those applied in the Group's financial statements for the 52 weeks to 1 April 2023, as set out on pages 271 to 272 of those financial statements.

There have been no changes to the significant estimates relating to impairment, or reversal of impairment, of property plant and equipment and right-of-use assets, inventory provisioning or uncertain tax positions in the period.

Key judgements in applying the Group's accounting policies

Judgements are those decisions made when applying accounting policies which have a significant impact on the amounts recognised in the Group's financial statements. Key judgements that have a significant impact on the amounts recognised in the condensed consolidated interim financial statements for the 26 weeks to 30 September 2023 and the 26 weeks to 1 October 2022 are as follows:

Where the Group is a lessee, judgement is required in determining the lease term at initial recognition, and throughout the lease term, where extension or termination options exist. In such instances, all facts and circumstances that may create an economic incentive to exercise an extension option, or not exercise a termination option, have been considered to determine the lease term. Considerations include, but are not limited to, the period assessed by management when approving initial investment, together with costs associated with any termination options or extension options. Extension periods (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Where the lease term has been extended by assuming an extension option will be recognised, this will result in the initial right-of-use assets and lease liabilities at inception of the lease being greater than if the option was not assumed to be exercised. Likewise, assuming a break option will be exercised will reduce the initial right-of-use assets and lease liabilities. There have been no significant judgements in relation to lease term made in the period. Refer to note 23 for details of a significant judgement made in relation to lease term after the balance sheet date.

Translation of the results of overseas businesses

The results of overseas subsidiaries are translated into the Group's presentation currency of sterling each month at the average exchange rate for the month, weighted according to the phasing of the Group's trading results. The 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 the closing rates. Differences arising on the retranslation of the opening net investment in subsidiary companies, and on the translation of their results, are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

The principal exchange rates used were as follows:

Adjusted profit before taxation

In order to provide additional consideration of the underlying performance of the Group's ongoing business, the Group's results include a presentation of Adjusted operating profit and Adjusted profit before taxation (adjusted PBT). Adjusted PBT is defined as profit before taxation and before adjusting items. Adjusting items are those items which, in the opinion of the Directors, should be excluded in order to provide a consistent and comparable view of the performance of the Group's ongoing business. Generally, this will include those items that are largely one-off and/or material in nature as well as income or expenses relating to acquisitions or disposals of businesses or other transactions of a similar nature, including the impact of changes in fair value of expected future payments or receipts relating to these transactions. Adjusting items are identified and presented on a consistent basis each year and a reconciliation of adjusted PBT to profit before tax is included in the financial statements. Adjusting items and their related tax impacts, as well as adjusting taxation items, are added back to/deducted from profit attributable to owners of the Company to arrive at adjusted earnings per share. Refer to note 4 for further details of adjusting items.

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 the Group'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, outlets and digital commerce as well as Burberry franchisees, prestige department stores globally and multi-brand specialty accounts. The flow of global product between retail and wholesale channels and across our regions is monitored and optimised at a corporate level and implemented via the Group's inventory hubs and principal distribution centres situated in Europe, the US, Mainland China and Hong Kong S.A.R. China.

Licensing revenues are generated through the receipt of royalties from global licensees of beauty products, eyewear and from licences relating to the use of non-Burberry trademarks in Japan.

The Board assesses channel performance based on a measure of adjusted operating profit. This measurement basis excludes the effects of adjusting items. 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 charges are not included in the result for each operating segment that is reviewed by the Board.

1. Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.

2. Refer to note 4 for details of adjusting items.

Additional revenue analysis

All revenue is derived from contracts with customers. The Group derives Retail and Wholesale revenue from contracts with customers from the transfer of goods and related services at a point in time. Licensing revenue is derived over the period the licence agreement gives the customer access to the Group's trademarks.

1. EMEIA comprises Europe, Middle East, India and Africa.

Due to the seasonal nature of the business, Group revenue is usually expected to be higher in the second half of the year than in the first half. While some of the Group's operating costs are also higher in the second half of the year, such as contingent rentals and sales related employee costs, most of the operating costs, in particular salaries and fixed rentals, are phased more evenly across the year. As a result, adjusted operating profit is expected to be higher in the second half of the financial year.

4. Adjusting items