Mulberry Group Regulatory News (MUL)

8 Dec 2005 07:00

Mulberry Group PLC08 December 2005 8 December 2005 MULBERRY GROUP PLC ("Mulberry" or the "Group") Interim Results MULBERRY GROUP PLC POSTS RECORD INTERIM RESULTS Mulberry Group Plc, delivered on its strategy of concentrating on its coreproducts of handbags and leather accessories with an operating profit for thefirst half of £2.3 million (2004: £133,000) with a 59% increase in sales overthe same period in 2004. HIGHLIGHTS • Sales for the six months to 30 September 2005 increased by 59% to £19.1 million (2004: £12.1 million). Sales growth in the previous six months to 31 March 2005 was 36%. • Gross profit margin increased to 54% (six months to 30 September 2004: 52.6%) • The Group has generated over £6.2 million of cash, before financing, in the last twelve months and, at 30 September 2005, had cash at bank of £3.8 million (30 September 2004: net bank borrowings of £2.3 million). • The accessories third party order book for the Autumn/Winter 2005 season finished approximately 80% ahead of the prior year comparative order book. • Orders from the new markets of the USA, Asia and Japan increased significantly and accounted for over 20% of the order book compared to 5% in Autumn/Winter 2004. • UK full price like for like retail sales were 35% higher for the six months to 30 September 2005. GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: "We have delivered strongsales and profit growth by focusing on handbags and leather accessories. Demandcontinues to grow in the UK and Europe. The expansion of our business in theUSA, Asia and Japan is proving successful." Enquiries WMC Communications Ltd Tel: 0207 930 9030David Wynne-Morgan orCharlie Geller INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 CHAIRMAN'S STATEMENT The Group has continued to make excellent progress and made an operating profitfor the first half of £2.3 million (2004: £133,000). The Group's strategy of concentrating on its core products of handbags andleather accessories has produced strong sales growth in both new and existingmarkets. Sales for the six months to 30 September 2005 increased by 59% to £19.1million (2004: £12.1 million). Sales growth in the previous six months to 31March 2005 was 36%. Gross profit margin increased to 54% (six months to 30 September 2004: 52.6%) asa result of the increased volume despite the lower margins on sales to ourdistribution partners in the USA, Asia and Japan. Operating expenses increased by £1.8 million, reflecting the costs associatedwith increased sales volume, the running costs of four new shops and concessionsthat have opened in the last year and modest investment in the infrastructureand people to sustain the continued growth of our business. The Group has generated over £6.2 million of cash, before financing, in the lasttwelve months from profit and working capital reduction and, at 30 September2005, had cash at bank of £3.8 million (30 September 2004: net bank borrowings£2.3 million). The Group has unutilised term loan and overdraft facilities of£7.5 million. The interim accounts reflect the adoption of a new reporting standard, FRS 25,which requires that a substantial part of the preference shares be reclassifiedfrom equity and reserves to long term debt and the related dividends bereclassified as an interest cost. This is explained in note 1 to the accounts. BUSINESS REVIEW Accessories, which account for over 90% of Group sales, have seen substantialgrowth in the period. The accessories third party order book for the Autumn/Winter 2005 season finished approximately 80% ahead of the prior yearcomparative order book. Orders from the new markets of the USA, Asia and Japanincreased significantly and accounted for over 20% of the order book compared to5% in Autumn/Winter 2004. UK full price like for like retail sales were 35% higher for the six months to30 September 2005. In May 2005, a new shop was opened at Heathrow in Terminal 1.This has been an immediate success. A new shop will open in Edinburgh in earlyFebruary 2006, allowing us to consolidate two department store concessions intoa stand alone Mulberry store. Our marketing has continued to expand to include the USA, Asia and Japan. Theadvertising and PR campaigns have succeeded in their objective of bringing thebrand to the attention of a wide spectrum of fashion conscious customersworldwide. The new campaign for Spring 2006 will be seen in many more leadingpublications throughout the world. This will result in increased expenditure inthe second half. MARKETS Following the USA launch in Autumn 2004, our distribution has developed wellthrough our 50% owned distributor Mulberry USA LLC. Our customers includeBergdorf Goodman, Barneys, Neiman Marcus, Saks and Nordstrom with whom we havesuccessfully targeted the premier store in each city. In Autumn 2005, Mulberryhandbags were available in sixty three US stores, and this is expected toincrease to eighty nine in Spring 2006. Club 21, our distributor in Asia apart from Japan, opened Mulberry shops in HongKong, Bangkok and Kuala Lumpur between October 2004 and June 2005. They plan toopen a second shop in Bangkok and a first shop in Taiwan in Spring 2006.Further shops throughout the region are planned over the next two years subjectto securing appropriate sites. In Japan, distributors Mitsui and Sanki Shoji continue to develop sales withdepartment stores. In Europe, our franchise partners in Scandinavia and Northern Europe areachieving strong sales growth while Italy and Spain, which have not beendeveloped historically, are showing potential. CURRENT TRADING AND OUTLOOK Demand in the UK and Europe continues to grow strongly, although at a slowerrate, following a period of rapid development. The development of our businessin the USA, Asia and Japan is progressing well with consumer demand drivingsales. The accessories third party order book for the Spring 2006 season isapproximately 85% ahead of the order book at the same point in the prior year.It is estimated that more than 80% of the orders for the Spring 2006 season havebeen taken at this date. Third party wholesale sales account for approximatelyhalf of the Group's turnover. Mulberry's own stores in the UK continue to trade strongly. The rate of growthwill decline in the second half because the figures will be compared to theperiod last year when substantial sales growth was achieved. UK full price likefor like retail sales for the nine weeks to 3 December 2005 were 11% higher thanthe prior year comparative period. DIVIDENDS The Board is not recommending the payment of a dividend on the ordinary sharesat this point but will review the resumption of paying dividends when thedistributable reserves have reached a level that will support the Board'sbusiness plan. The Group has generated sufficient distributable reserves to paythe dividend on the preference shares. This is a contractual commitment and thetotal of £736,000, which comprises £638,000 of arrears from prior periods and£98,000 in respect of the six month period to 30 September 2005, will be paid inDecember. STAFF The continued success of the brand is the direct result of the talent, hard workand enthusiasm of our people. I would like to take this opportunity to thankthem all. Godfrey DavisChairman and Chief Executive8 December 2005 Contacts: WMC CommunicationsDavid Wynne-Morgan or Charlie Geller 020 7930 9030 Teather & Greenwood LimitedMark Dickenson 020 7426 9000 CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.05 30.09.04 31.03.05 Restated Restated Note £'000 £'000 £'000 TURNOVER 19,141 12,073 30,064 Cost of sales (8,811) (5,716) (13,926) GROSS PROFIT 10,330 6,357 16,138 Other operating expenses (net) (8,053) (6,224) (14,001) OPERATING PROFIT 2,277 133 2,137 Group share of loss of associated undertakings (18) - (17) Interest receivable and similar income 49 - 27Interest on preference shares 1 (98) (98) (196)Finance costs on preference shares (27) (26) (53)Interest payable and similar charges (17) (116) (193) PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 2,166 (107) 1,705 Tax on profit/(loss) on ordinary activities 2 (573) - 33 RETAINED PROFIT / (LOSS) FOR THE PERIOD 1,593 (107) 1,738 Earnings per share for the period - basic 3.26p (0.22p) 3.56p Earnings per share for the period - diluted 3.00p (0.22p) 3.49p Dividend per ordinary share Nil pence Nil pence Nil pence CONSOLIDATED BALANCE SHEET Unaudited Unaudited Audited 30.09.05 30.09.04 31.03.05 Restated Restated Note £'000 £'000 £'000 FIXED ASSETS AND INVESTMENTS 5,086 5,350 4,964 CURRENT ASSETSStocks 5,576 7,146 5,379Debtors 5,780 3,753 3,522Cash at bank and in hand 3,774 694 2,183 15,130 11,593 11,084 CREDITORS: Amounts falling due within one year 1 (7,554) (4,234) (4,383) NET CURRENT ASSETS 7,576 7,359 6,701 TOTAL ASSETS LESS CURRENT LIABILITIES 12,662 12,709 11,665 CREDITORS: Amounts falling due after more than one year (2,529) (5,512) (2,517) NET ASSETS 10,133 7,197 9,148 CAPITAL AND RESERVES Called up share capital 1 2,463 2,459 2,460 Reserves 1 7,670 4,738 6,688 SHAREHOLDERS' FUNDS 10,133 7,197 9,148 CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.05 30.09.04 31.03.05 Note £'000 £'000 £'000 Operating profit 2,277 133 2,137Depreciation and impairment charge 473 398 939(Increase) / decrease in stocks (197) (581) 1,186Increase in debtors (2,258) (312) (37)Increase in creditors 1,842 261 582 NET CASH INFLOW / (OUTFLOW) FROM OPERATIONS 2,137 (101) 4,807 Returns on investments and servicing of finance 32 (116) (162)Taxation - - (11)Capital expenditure (505) (206) (460) NET CASH INFLOW / (OUTFLOW) BEFORE FINANCING 1,664 (423) 4,174 Financing (99) (153) (3,286) INCREASE / (DECREASE) IN CASH IN THE PERIOD 1,565 (576) 888 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS / DEBT Increase / (Decrease) in cash in the period 1,565 (576) 888 Cash outflow from decrease in debt and lease finance 110 153 3,297 1,675 (423) 4,185Inception of finance leases (39) - - Movement in net debt 1,636 (423) 4,185 NET FUNDS / (DEBT) AT BEGINNING OF PERIOD ASPREVIOUSLY REPORTED 2,004 (2,231) (2,231)Effect of adoption of FRS 25 1 (2,464) (2,414) (2,414)NET DEBT AT BEGINNING OF PERIOD (RESTATED) (460) (4,645) (4,645) NET FUNDS / (DEBT) AT END OF PERIOD 1,176 (5,068) (460) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.05 30.09.04 31.03.05 Restated Restated £'000 £'000 £'000 Profit/(loss) for the period 1,593 (107) 1,738 Currency translation differences on foreign currency net 16 - (5)investments TOTAL RECOGNISED GAINS AND (LOSSES) IN THE PERIOD 1,609 (107) 1,733 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.05 30.09.04 31.03.05 Restated Restated £'000 £'000 £'000 Profit / (loss) for the period 1,593 (107) 1,738Issue of new shares net of costs 12 - 11Finance costs on preference shares 2 1 3Currency translation differences on foreign currency net 16 - (5)investmentsReclassification of preference dividend reserve as a liability (638) - -Transfers to preference dividend reserve - 98 196 Net increase/(decrease) to shareholders' funds 985 (8) 1,943Opening shareholders' funds - restated 9,148 7,205 7,205 CLOSING SHAREHOLDERS' FUNDS 10,133 7,197 9,148 NOTES 1. ACCOUNTING POLICIES The interim results contained in this report have been prepared using accountingpolicies consistent with those used in the preparation of the annual report andaccounts for the year ended 31 March 2005 with the exception of the adoption ofFRS 25 'Financial Instruments: disclosure and presentation' this year. The effect of the adoption of FRS 25 is that the 'B' Preference Shares aredefined as compound financial instruments and are disclosed partly as equity andpartly as financial liability. As a result of this change the net assets of theGroup as at 30 September 2005 have been reduced by £2,489,000. In addition, thedividends payable on the preference shares have been reclassified in the profitand loss account from dividends to interest. The effect of this on the figuresto 30 September 2005 is the reclassification of £98,000. Both sets of prioryear comparatives have been restated to reflect the new treatment. The effectof the restatement is as follows: Balance Sheet 6 months 12 months to 30.09.04 to 31.03.05 Financial liabilities +£2,439,000 +£2,464,000 Equity and reserves -£2,439,000 -£2,464,000 Profit and Loss Account Preference dividends -£98,000 -£196,000 Interest payable on preference shares +£98,000 +£196,000 On the basis of the Group having sufficient distributable reserves at the end ofthe period the arrears of preference dividends from prior periods of £638,000becomes payable and has been moved from reserves to short term creditors pendingpayment. 2. TAXATION The corporation tax charge for the period is based on the effective rate whichit is estimated will apply for the full year. 3. COMPARATIVE FIGURES The comparative figures for the year ended 31 March 2005, which do notconstitute statutory accounts, are abridged from the company's statutoryaccounts which have been filed with the Registrar of Companies. The report ofthe auditors, Deloitte & Touche LLP, on these accounts was unqualified and didnot contain a statement under section 237(2) or (3) of the Companies Act 1985. 4. APPROVAL AND DISTRIBUTION This report was approved by the Board of Directors on 7 December 2005 and isbeing sent to all shareholders. Additional copies are available from the CompanySecretary at the Registered Office Kilver Court, Shepton Mallet, Bath, BA4 5NF. This information is provided by RNS The company news service from the London Stock Exchange