Mulberry Group Regulatory News (MUL)

7 Dec 2006 07:00

Mulberry Group PLC07 December 2006 MULBERRY GROUP PLC ("Mulberry" or the "Group")7 DECEMBER 2006 Mulberry Group Plc, delivered a 10% increase in operating profit for the firsthalf to £2.5 million (2005: £2.2 million). HIGHLIGHTS • Sales for the six months to 30 September 2006 increased by 8% to £20.7 million (2005: £19.1 million)• Gross profit margin increased to 56.5% (six months to 30 September 2005: 54.0%)• The Group has continued to generate cash from operations in the last six months and had cash at bank of £7.0 million (30 September 2005: £3.8 million)• Mulberry USA LLC opens first Mulberry shop in USA. GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: "As projected, Mulberryhas grown at a more moderate pace, in this period, while we consolidate theexceptional sales advances that we made last year. This will create the platformfor the next stage of the development of Mulberry as a global brand." EnquiriesWMC Communications Ltd Tel: 0207 930 9030David Wynne-Morgan orCharlie Geller MULBERRY GROUP PLC ("Mulberry" or the "Group") INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2006 CHAIRMAN'S STATEMENT The Group has continued to make progress. Sales for the six months to 30September 2006 increased by 8% to £20.7 million (2005: £19.1 million). Operatingprofit increased by 10% for the first half to £2.5 million (2005: £2.2 million). Gross profit margin increased to 56.5% (six months to 30 September 2005: 54.0%). Operating expenses increased by £1.1 million. This reflects the costs associatedwith two new standalone shops and six new concessions that have opened in theeighteen months, increased marketing and investment in the infrastructure andpeople to sustain the continued growth of our business. Mulberry USA LLC has incurred losses primarily due to up front recruitmentcosts, rent and other pre-trading costs related to the first five Mulberry shopsin the USA. The Group's share of the loss of Mulberry USA LLC for the period to30 September 2006 is £0.2 million which is accounted for in the profit and lossaccount within the results of associated undertakings. The Group's cash position continues to be strong with cash generated fromoperating activities before tax and capital expenditure of £2.8 million (2005:£2.2 million). At 30 September 2006, the Group had cash at bank of £7.0 million(30 September 2005: £3.8 million). The Group has unutilised term loan andoverdraft facilities of £7.5 million. BUSINESS REVIEW Our emphasis in the current year is to continue the development of Mulberry as aglobal brand. As explained in the final results announcement in June 2006, thegrowth in sales this year will be modest as we digest and consolidate thesubstantial gains made last year. Accessories, which account for over 90% of Group sales, continue to be theprimary focus in all markets. The accessory third party order book for theAutumn/Winter season finished 4% ahead of the prior year order book. The Group's standalone retail shops and department store concessions comprised45% of Group sales in the six month period to 30 September 2006. Total retailsales of our own shops increased by 19%. This reflected sales growth of 7% inour like for like UK shops and the sales from new shops, including the freestanding shop in Edinburgh and new department store concessions in House ofFraser. CURRENT TRADING AND OUTLOOK The current year is expected to show modest sales growth as we consolidate thesubstantial gains achieved last year. We expect this process to continue for theremainder of the year to 31 March 2007. In the UK, we plan to open new shops in Glasgow and Terminal 3 at Heathrow. Thelatter has been a long term objective in view of the success of our shops inTerminals 1 and 4. In addition, we are one of the first brands to agree space inthe new Terminal 5, which will open in 2008. We will complete the process ofconverting our business with House of Fraser from wholesale to concessionsmanaged by our retail team. Like for like retail sales in our UK shops andconcessions for the nine weeks to 2 December were 7% higher than the prior yearcomparative period. The Mulberry shop at 171-175 Brompton Road, London, was being run as a franchiseby a company under the same ultimate control as Challice Limited, which owns53.5% of the ordinary shares in Mulberry Group plc. As announced on 5 December2006, we have acquired this shop which will be consolidated into our own retailbusiness. In Europe, we have purchased the lease of a shop in Rue St Honore, Paris for €2million. The total investment, including shop fit will be in the region of €3million by the time the shop opens next Spring. Mulberry USA LLC opened the first USA shop in Bleecker Street, New York, on 17November 2006. Three further shops are due to open before Christmas. These are:a flagship at 605 Madison Avenue, New York; Americana Mall, Long Island; andMelrose Place, Los Angeles with a fifth shop planned for The Pier at Caesar's,Atlantic City in Spring 2007. The wholesale business in the USA, which waslargely based on the phenomenal success of the Roxanne bag, will reduce as theteam focus on building awareness of the brand showing the full Mulberryexperience in our new shops. Due to the timing and quantity of the shopopenings, we expect the pre-trading and start up costs in the USA to generatelosses that will result in a full write down of our investment. The conditions for the conversion of the 8,000,000 B preference shares intoordinary shares, on a one for one basis, at the option of the holder ChalliceLimited, will have been met when these shops are opened by Mulberry USA LLC. Ifthe B preference shares are not converted by 11 September 2008 they will beredeemed by the Company at 35 pence per share. In Asia, our partners have opened a shop in Orchard Road, Singapore and agreedthe lease on a second larger shop in Hong Kong, which is planned to open beforeChristmas 2007. There are no major developments to report in Japan over the last six months. In Korea, our partners have opened a Mulberry fitted space in The Galleriadepartment store which is trading well and expect to open in another departmentstore in the Spring. Historically, our marketing and advertising expenditure has been focused on theUK and Europe. In view of the pace of international shop openings, we plan tospend more on advertising in the Spring with the objective of increasingconsumer awareness of our unique brand in all our markets. DIVIDENDS The dividend of 1 penny per ordinary share, announced with the final results inJune 2006 was paid in August 2006. The Board has adopted a progressive dividendpolicy in respect of the ordinary shares. A dividend for the current year willbe considered in June 2007 when the results are available. The Board is notrecommending the payment of an interim dividend on the ordinary shares. The dividend on the B preference shares of £196,000 per annum is paid in twoinstalments, on 30 June and 31 December each year. STAFF The continued progress of our brand is the direct result of the perseverance andenergy of our people. I would like to take this opportunity to thank them all. Godfrey DavisChairman and Chief Executive 7 December 2006 Contacts: WMC CommunicationsDavid Wynne-Morgan or Charlie Geller 020 7930 9030 Teather & Greenwood LimitedMark Dickenson or Fred Walsh 020 7426 9000 CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.06 30.09.05 31.03.06 Restated Restated Note £'000 £'000 £'000TURNOVER 20,655 19,141 43,406Cost of sales (8,984) (8,811) (18,912) GROSS PROFIT 11,671 10,330 24,494 Other operating expenses (net) (9,203) (8,094) (18,337) OPERATING PROFIT 2,468 2,236 6,157 Group share of profit/(loss) of associated undertakings (234) (18) 95 Interest receivable and similar income 137 49 163 Finance costs on preference shares (125) (125) (249)Other interest payable and similar charges (15) (17) (31) Interest payable and similar charges (140) (142) (280) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,231 2,125 6,135 Tax on profit on ordinary activities 2 (758) (573) (1,304) PROFIT FOR THE PERIOD 1,473 1,552 4,831 Earnings per share for the period - basic 3.0p 3.2p 9.9p Earnings per share for the period - diluted 2.8p 2.9p 8.8p CONSOLIDATED BALANCE SHEET Unaudited Unaudited Audited 30.09.06 30.09.05 31.03.06 Note £'000 £'000 £'000 FIXED ASSETS INCLUDING INVESTMENTS 6,658 5,086 5,958 CURRENT ASSETSStocks 6,508 5,576 5,967Debtors 5,605 5,780 5,239Cash at bank and in hand 6,959 3,774 7,282 19,072 15,130 18,488 CREDITORS: Amounts falling due within one year (8,648) (7,554) (8,415) NET CURRENT ASSETS 10,424 7,576 10,073 TOTAL ASSETS LESS CURRENT LIABILITIES 17,082 12,662 16,031 CREDITORS: Amounts falling due after more than one year (2,584) (2,529) (2,579) NET ASSETS 14,498 10,133 13,452 CAPITAL AND RESERVES Called up share capital 2,471 2,463 2,467 Reserves 12,027 7,670 10,985 SHAREHOLDERS' FUNDS 14,498 10,133 13,452 CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.06 30.09.05 31.03.06 Note £'000 £'000 £'000 Restated Restated Operating profit 2,468 2,236 6,157 Depreciation, impairment charge and loss on disposal 501 473 1,182FRS20 share based payment 51 41 82Increase in stocks (541) (197) (588)Increase in debtors (366) (2,258) (1,483)Increase in creditors 684 1,867 2,608 NET CASH INFLOW FROM OPERATIONS 2,797 2,162 7,958 Returns on investments and servicing of finance 24 32 (655)Ordinary dividends paid (490) - -Taxation (987) - (550)Capital expenditure (1,707) (505) (1,543) NET CASH INFLOW / (OUTFLOW) BEFORE FINANCING (363) 1,689 5,210 Financing 39 (99) (111) (DECREASE) / INCREASE IN CASH IN THE PERIOD (324) 1,590 5,099 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS / DEBT (Decrease) / increase in cash in the period (324) 1,590 5,099 Cash outflow from decrease in debt and lease finance 21 110 145 (303) 1,700 5,244Other non-cash changesInception of finance leases - (39) (73)Preference shares (25) (25) (50) Movement in net debt (328) 1,636 5,121 NET FUNDS / (DEBT) AT BEGINNING OF PERIOD 4,661 (460) (460) NET FUNDS AT END OF PERIOD 4,333 1,176 4,661 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.06 30.09.05 31.03.06 Restated Restated £'000 £'000 £'000 Profit for the period 1,473 1,552 4,831 Currency translation differences on foreign currency net (50) 16 (9)investments TOTAL RECOGNISED GAINS IN THE YEAR 1,423 1,568 4,822 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30.09.06 30.09.05 31.03.06 Restated Restated £'000 £'000 £'000 Profit for the period 1,473 1,552 4,831Issue of new shares net of costs 60 12 34Finance costs on preference shares 2 2 4Currency translation differences on foreign currency net (50) 16 (9)investmentsReclassification of preference dividend reserve as a liability - (638) (638)FRS20 share based payment credit to reserves 51 41 82Ordinary dividend proposed and paid (490) - - Net increase to shareholders' funds 1,046 985 4,304Opening shareholders' funds 13,452 9,148 9,148 CLOSING SHAREHOLDERS' FUNDS 14,498 10,133 13,452 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 2006 with the exception of the adoption ofFRS20 'Share based payments' this year. The company has applied therequirements of FRS20 to all grants of equity instruments after 7 November 2002that were unvested at 1 April 2006 and to all grants of equity instrumentssubsequent to that. The Group issues equity-settled share based payments to certain employees.Equity-settled share based payments are measured at fair value (excluding theeffect on non market based vesting conditions) at the date of grant. The fairvalue as determined at the grant date of the equity-settled share based paymentsis expensed on a straight-line basis over the vesting period or the period towhich the service relates, based on the company's estimate of shares that willeventually vest and adjusted for the effect of non-market based vestingconditions. Fair value is measured by use of the Black-Scholes Option Pricing Model. Theexpected life used in the model has been adjusted, based on management's bestestimate, for the effects of non-transferability, exercise restrictions andbehavioral considerations. 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 2006, which do notconstitute statutory accounts, are abridged from the company's statutoryaccounts which have been filed with the Registrar of Companies, as restated forthe effect of the adoption of FRS20 in the period. The report of the auditors,Deloitte & Touche LLP, on these accounts was unqualified and did not contain astatement 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 6 December 2006 and isbeing sent to all shareholders. Additional copies are available from the CompanySecretary at the Registered Office The Rookery, Chilcompton, Somerset BA3 4EH. This information is provided by RNS The company news service from the London Stock Exchange