Mulberry Group Regulatory News (MUL)

22 Jun 2006 07:01

Mulberry Group PLC22 June 2006 MULBERRY GROUP PLC ("Mulberry" or the "Group") PRELIMINARY RESULTS FORTHE YEAR TO 31 MARCH 2006 Mulberry Group Plc, the AIM listed luxury brand, announced pre-tax profits thathave trebled to £6.2 million and the payment of the first dividend since 1998. GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: "We have delivered exceptional sales and profit growth and generated substantialcash balances. This was a result of focusing on our core products of handbagsand leather accessories and the early benefits of our international expansionprogramme. There will be a dividend of 1 penny per share. Mulberry's current trading outlook is positive, in what are more challengingtimes. Our priority now is to build the brand in the USA, Asia and Japan." HIGHLIGHTS • Sales increased by 44% to £43.4 million (2005: £30.1 million) • Operating profit of £6.2 million (2005: £2.1 million) • Net cash £7.3 million (2005: £2.2 million) • Dividend of 1.0 pence per ordinary share (2005: nil) • Current trading and outlook positive: • Autumn 2006 order book 12% ahead of last year • UK Retail sales for 11 weeks to 17 June 2006 up by 19% FOR FURTHER DETAILS PLEASE CONTACT: WMC CommunicationsDavid Wynne-Morgan or Charlie Geller 0207 930 9030 Teather & Greenwood LimitedMark Dickenson or Fred Walsh 0207 426 9000 CHAIRMAN'S STATEMENT The Group has continued to make excellent progress delivering strong salesgrowth and a significant increase in operating profit to £6.2 million (2005:£2.1 million). Strong cash generation from operations of £8.0 million (2005: £4.9 million)resulted in cash balances increasing by £5.1 million. This was after £784,000 ofpreference dividends, including £638,000 of arrears from previous periods, werepaid and $1.0 million was invested in Mulberry USA LLC. A dividend of 1.0 pence per share is being recommended (2005: nil). Sales for the year increased by 44% to £43.4 million (2005: £30.1 million). Thisrise was due to a combination of continued growth in the UK and strong demandfrom Europe, USA, Asia and Japan as the international expansion strategydeveloped. Gross profit margin, increased from 53.7% to 56.4%. Margins improved due to theincreased volumes achieved. Operating expenses increased by £4.3 million reflecting the rent and staff costsof new shops and concessions as well as the increased investment in marketing,people and infrastructure to support the future growth of the business. The Group made a profit on ordinary activities before tax for the year of £6.2million (2005: restated £1.7 million). The results for the year to 31 March 2005 have been partially restated due tothe adoption of FRS25. The 'B' Preference shares are now defined as compoundfinancial instruments and disclosed partly as equity and partly as a financialliability. This has also resulted in the dividends on the shares and associatedfinance costs being reclassified from dividends to interest payable. Therelevant prior year comparatives have been restated to reflect the newtreatment. At 31 March 2006, the Group had net cash on hand and at bank of £7.3 million(2005: £2.2 million). The Group has term loan and overdraft facilities of £7.5million with its principal bankers HSBC Bank plc. BUSINESS REVIEW Accessories, which are our core business, account for over 90% of Group sales.Spring 2006 wholesale orders from the UK and Europe increased by 25% on theprior year and accounted for 67% of the order book. Orders from the new marketsof the USA, Asia and Japan grew to 30% of the total compared to 17% in theprevious year. Sales of leather handbags continued to be the main driving force behind thesesales increases. Third party wholesale sales to the international distribution partners,franchisees and independent retailers, account for over 55% of the Group'ssales, compared to 50% last year. For the 52 weeks to 1 April 2006 sales in our own UK shops increased by 26%.Like for like sales in our shops increased by 14%. We opened a Mulberry shop in Heathrow Terminal 1 in May 2005 and a new shop inEdinburgh and four concessions in House of Fraser stores in February 2006. We continue to expand our advertising and PR campaigns with the objective ofbringing the brand to the attention of a wide spectrum of fashion consciouscustomers worldwide. The campaigns for Autumn 2006 and Spring 2007 will featurein leading UK, European, Asian and Japanese fashion publications. During the year, the main London offices and design studio were consolidated toa new single location at Shepherds Bush. The sales offices and showrooms remainin Bond Street above our flagship store. This reduces the number of officelocations in London from three to two. A similar process is underway inSomerset. In December 2005, the Group's distribution centre was moved to amodern 40,000 sq ft unit, providing space for future expansion. This has freedspace at our Rookery factory which will be used to increase UK production of ourpremium leather bags over the next two years. In July 2006, the Group's Somersethead office will move to new offices, which are under construction at theRookery factory. This will complete the rationalisation of the Group's UKoffices, warehouse and factory, significantly improving communication andproviding space for future expansion. CURRENT TRADING AND OUTLOOK The Spring 2006 third party accessories wholesale order book closed at the endof May 2006 53% ahead of the previous year. The accessories third party orderbook for the Autumn 2006 season is approximately 12% ahead of the order book atthe same point in the prior year. This reflects a period of relativeconsolidation following the exceptional growth in Autumn 2005 when the orderbook increased by approximately 80%. It is estimated that more than threequarters of the orders for the Autumn 2006 season have been taken at this date. Although conditions are more difficult, our retail sales in the UK, for thefirst eleven weeks of the new financial year, are up by approximately 19% andlike for like sales in the same period are up by approximately 4%. In the USA our associated company, Mulberry USA LLC, has signed a lease for itsfirst shop in Bleecker Street, New York. Further shops are under negotiationwith the objective of opening five shops by 31 March 2007. In parallel withopening these shops, we expect that the distribution through department storeswill reduce as the retail phase of our strategy to develop the market takeseffect. As a result, we expect that sales to the USA will be flat in the yearahead and that Mulberry USA LLC will make a loss due to the normal pre-tradingand start up costs of the shops. In Japan, our partners have opened the first shop in Roppongi Hills, Tokyo andcontinue to open Mulberry corners in department stores as space becomesavailable. In the rest of Asia, our partners now operate five Mulberry branded shops havingopened a new shop in Taipei, Taiwan in April 2006. A lease has been agreed on ashop in Orchard Road, Singapore, which will open later this year. In Korea, wehave signed a distribution agreement and expect that the first department storeconcession will open in the Autumn. In the Middle East, we have signed a new franchise agreement in Dubai with ashop planned in 2007 when the new Dubai Mall opens. Management's primary aim for the current year is to increase the internationalpenetration of our brand. The impact on sales in the current year will bemoderate as we digest and consolidate the substantial gains achieved last year.Other operating expenses will increase to include the rent and staff costs ofthe new shops and concessions for the whole year. Marketing expenditure willincrease to support the new markets. We expect that the full impact of theinternational expansion will benefit the year to 31 March 2008 and subsequentperiods. DIVIDENDS The Board is recommending the payment of a dividend on the ordinary shares of1.0 pence per share. The dividend on the preference shares of £196,000 perannum is paid in two instalments on 30 June and 31 December each year. STAFF I would like to thank all of our people for their enthusiasm, energy andcommitment. The outstanding achievements of the last year are a direct result oftheir efforts and would not have been possible without them. Godfrey DavisChairman and Chief Executive 22 June 2006 Contacts: WMC CommunicationsDavid Wynne-Morgan or Charlie Geller 020 7930 9030 Teather & Greenwood LimitedMark Dickenson or Fred Walsh 0207 426 9000 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2006 2006 2005 £'000 £'000 Restated TURNOVER 43,406 30,064Cost of sales (18,912) (13,926) ---------- ----------GROSS PROFIT 24,494 16,138Other operating expenses (net) (18,255) (14,001) ---------- ----------OPERATING PROFIT 6,239 2,137 Group share of profit/(loss) of associated undertakings 95 (17)Interest receivable and similar income 163 27 Finance costs on preference shares (249) (249)Other interest payable and similar charges (31) (193) Interest payable (280) (442) ---------- ----------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 6,217 1,705Taxation on profit on ordinary activities (1,304) 33 ---------- ----------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION, 4,913 1,738BEING PROFIT FOR THE FINANCIAL YEAR ---------- ----------EARNINGS PER ORDINARY SHARE - basic 10.06p 3.56p ========== ========== - diluted 8.91p 3.49p ========== ========== CONSOLIDATED BALANCE SHEET31 March 2006 2006 2005 £'000 £'000 RestatedFIXED ASSETSTangible assets 5,228 4,904Investments 730 60 ---------- ---------- 5,958 4,964 ---------- ----------CURRENT ASSETSStocks 5,967 5,379Debtors 5,239 3,522Cash at bank and in hand 7,282 2,183 ---------- ---------- 18,488 11,084CREDITORS: Amounts falling due within one year (8,415) (4,383) ---------- ----------NET CURRENT ASSETS 10,073 6,701 ---------- ----------TOTAL ASSETS LESS CURRENT LIABILITIES 16,031 11,665CREDITORS: Amounts falling due after more than one year (2,579) (2,517) ---------- ----------NET ASSETS 13,452 9,148 ========== ========== CAPITAL AND RESERVESCalled-up share capital 2,467 2,462Share premium account 4,547 4,514Revaluation reserve 80 111Capital redemption reserve 154 154Preference dividend reserve - 638Special reserve 1,467 1,467Profit and loss account 4,737 (198) ---------- ----------SHAREHOLDERS' FUNDS 13,452 9,148 ========== ========== CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2006 2006 2005 £'000 £'000 Restated NET CASH INFLOW FROM OPERATING ACTIVITIES 7,958 4,857Returns on investments and servicing of finance (655) (162)Taxation (550) (11)Capital Expenditure (1,543) (460) ---------- ----------Cash inflow before financing 5,210 4,224Financing (111) (3,286) ---------- ----------INCREASE IN CASH IN THE YEAR 5,099 938 ========== ========== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 2006 2005 £'000 £'000 Restated Increase in cash in the year 5,099 938Cash outflow from decrease in debt and lease financing 145 3,297 ---------- ---------- 5,244 4,235Other non-cash changesInception of finance leases (73) -Preference shares (50) (50) ---------- ----------Movement in net funds 5,121 4,185NET DEBT, BEGINNING OF YEAR (460) (4,645) ---------- ----------NET FUNDS/(DEBT), END OF YEAR 4,661 (460) ========== ========== NOTES 1. The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 March 2006 and 2005, but is derived from those financial statements. Statutory accounts for the year ended 31 March 2005 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2006 will be filed at Companies House upon receiving the approval of the Annual General Meeting. The auditors have reported on the accounts for the year ended 31 March 2005 and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. The results for the year ended 31 March 2006 contained in this report have been prepared using accounting policies consistent with those used in the preparation of the Annual Report and Financial Statements for the year ended 31 March 2005 apart from the adoption of FRS25 Financial Instruments: disclosure and presentation and FRS21 Events after the Balance Sheet date. Under FRS25 the 'B' Preference shares are now defined as compound financial instruments and disclosed partly as equity and partly as a financial liability. This has also resulted in the dividends on the shares and associated finance costs being reclassified from dividends to interest payable. The relevant prior year comparatives have been restated to reflect the new treatment. Consistent with the requirements of FRS21, which was introduced this year, the proposed dividend will not be recorded as a liability until it is approved at the Annual General Meeting. 3. Basic earnings per ordinary share has been calculated by dividing the profit on ordinary activities after taxation for each financial year by 48,833,591. (2005: 48,765,968) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Diluted earnings per share has been calculated by dividing the profit on ordinary activities after taxation excluding the interest and finance costs relating to the preference shares for each financial year by 57,909,182 (2005: 56,945,735) potential ordinary shares taking account of the potential conversion of the preference shares and exercise of unexercised options. 4. Copies of the Annual Report and Financial Statements will be posted to shareholders. Further copies can be obtained from Mulberry Group plc's registered office at Kilver Court, Shepton Mallet, Bath, BA4 5NF. Copies of this announcement are available for a period of one month from thedate hereof from the Company's registered office, Kilver Court, Shepton Mallet,Bath, BA4 5NF and from the Company's nominated adviser, Teather & GreenwoodLimited, Beaufort House, 15 St. Botolph Street, London, EC3A 7QR. This information is provided by RNS The company news service from the London Stock Exchange