Mulberry Group Regulatory News (MUL)

13 Dec 2007 07:00

Mulberry Group PLC13 December 2007 MULBERRY GROUP PLC ("Mulberry" or the "Group") Interim Results for the six months ended 30 September 2007 Mulberry Group Plc, the AIM listed British luxury design company, is pleased toannounce continued strong sales and the further development of its globalexpansion plans for the six months ended 30 September 2007. HIGHLIGHTS • UK retail like for like sales for the 26 weeks to 29 September 2007 up 11% • 8 new Mulberry shops and 9 department store concessions opened worldwide in the past year • Sales increased by 4% to £21.5 million (2006: £20.7 million) • Gross profit margin increased to 57.4% (2006: 56.5%) • Operating profit £1.1 million (2006: £2.5 million) reduced as anticipated, by significant investment in the business, specifically in developing global presence and brand awareness. This investment combined with the conversion of the preference shares in the period reduced basic earnings per share to 1.4 pence (2006: 3.0 pence) • Strong cash position of £7.6 million (2006: £7.0 million) CURRENT TRADING AND OUTLOOK • UK retail like for like sales for the 9 weeks to 1 December 2007 up 9% • Spring/Summer 2008 accessories wholesale order books up 6% on the previous year • 8 new shops and 4 department store concessions opening in the next 6 months GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED: "We continue to take the various steps needed to develop Mulberry as a globalluxury brand. Our programme of reinvesting in the business is already benefitingthe Company and consumer awareness in Asia and the USA is growing. The Groupcontinues to make steady progress while the foundations for international growthin the medium term are laid." -ENDS- Enquiries WMC CommunicationsDavid Wynne-Morgan 020 3178 4416Gavin Davis 020 7743 6677 / 07910104660 MULBERRY GROUP PLC ("Mulberry" or the "Group") INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2007 CHAIRMAN'S STATEMENT The Group continues to make solid progress as it develops into a global luxurybrand. We continue to invest in building our presence not only in the UK andEurope but also in new markets such as the USA, Asia and the Middle East. Thisstrategy is supported by our strong underlying profits and cash flow. Sales for the six months to 30 September 2007 increased by 4% to £21.5 million(2006: £20.7 million). As a result of our decision to develop our business internationally, especiallyin the USA and Asia, we have increased our expenditure substantially onadvertising and marketing. As I explained in my last Chairman's Statement, thisinvestment is an important part of the strategy to turn Mulberry into a globalluxury brand. As anticipated, this expenditure reduced our operating profits forthe period under review, which were £1.1 million (2006: £2.5 million). Basicearnings per share reduced to 1.4 pence (2006: 3.0 pence) due to the reductionin operating profits and the conversion of the preference shares in April 2007. The increased proportion of Group sales through Mulberry owned shops andconcessions resulted in a further improvement in our gross profit margins whichincreased to 57.4% (2006: 56.5%). Overall administrative expenses increased by £2.1 million in the six monthsunder review compared to the prior year. This includes the operating costs ofthe new shops and concessions opened in the previous twelve months of £1.6million combined with increased marketing and advertising expenditure of £0.8million which has been balanced by general savings in administrative andoccupancy costs as the process of simplifying operations has continued. The Group's cash position continues to be strong with cash generated byoperations before tax and capital expenditure of £1.3 million. At 30 September2007, the Group had cash at bank of £7.6 million (2006: £7.0 million). The Group has prepared these interim results using accounting policiesconsistent with International Financial Reporting Standards (IFRS). Mulberry hasnot published a separate IFRS transition statement as the impact is not materialto the Group's profit and loss account or balance sheet. Full details are shownin note 6. BUSINESS REVIEW We are following a two pronged strategy of completing our UK retail network inthe short term while building our international business in the medium term. As expected, growth has been at a more moderate pace in the first half of theyear, as we continue to build a strong platform for future growth. Our focuscontinues to be the development of Mulberry as a global luxury brand. Theimmediate financial impact of this is the increase in marketing and advertisingcosts as we work to build consumer awareness of the brand in the USA and Asia.In the twelve months to 30 September 2007, our partners opened five shops in theUSA and two department store corners in Korea. In the next six months the pacewill accelerate with new shops in Hong Kong, Singapore airport, Shanghai,Kuwait, Jeddah and two further department store corners in Korea. Over the last twelve months we have opened three further shops and sevenconcessions in department stores as we improve our control of the UK market.This includes new shops in Glasgow and at Stansted airport, which opened in theperiod. In the next six months we will open new shops in Covent Garden, HeathrowTerminal 5 and two concessions in department stores. In addition, we have openeda new outlet shop at Cheshire Oaks. For the twenty six weeks to 29 September2007, sales at our UK shops increased by 38% and like for like sales, for thesame period, increased by 11%. This substantial sales growth in more challengingmarket conditions reflects the strength of our product range. In particular, thenew Mabel bags introduced this Autumn and carried by celebrities such as KateMoss, Keira Knightley and Kate Bosworth have become immediate best sellers and,despite increasing production substantially, we have been unable to keep up withdemand for purple patent Bayswater bags, which continue to be extremely popular. Wholesale accessories orders for Autumn/Winter 2007 reduced by 13% as wecontinued to change the distribution pattern in both the UK and overseasmarkets. Due to the timing of deliveries, shipments to wholesale customers inthe first half were approximately 20% below the previous year. The wholesaleorder book for Spring/Summer 2008 is growing with orders up by 6% compared tothe same point in the prior year. Our factory at The Rookery, Chilcompton, Somerset, is an extremely valuable partof our brand DNA. Manufacturing in the UK is a significant challenge which ourteam tackles with energy and enthusiasm. In the last year, we have increased themanufacturing space, changed the production method and invested in new machineryall of which is showing benefits in productivity and quality. CURRENT TRADING AND OUTLOOK We expect that our business will continue to grow supported by the accelerationin the rate of new shop openings in the next six months and a strong Spring 2008collection. Sales in our UK shops in the nine weeks to 1 December were 36%higher than the prior year comparative period. Like for like sales for the sameperiod increased by 9%. We have agreed to develop the main markets in the Middle East with the ChaloubGroup, a leading luxury brand distributor for the region. The new shops thatwill open in Jeddah in Saudi Arabia and Kuwait are a result of this newpartnership. In the USA, Christmas will mark the first full year of trading for the shops. Asplanned, our partners will not open more stores until we both feel comfortablethat we have successfully built awareness in this market through ouradvertising, PR and marketing activities. We continue to see sales growth, which we believe is due to a combination offactors including the strength of our new product introductions, our investmentin the international markets and a level of insulation amongst luxury consumersfrom the vagaries of the high street, however, we are not immune to factors thataffect general retailing conditions and the Christmas period, as always, willhave a substantial impact on our year end results. Looking forward, the Group has developed a business model which is increasingsales and generating profit and cash, which will be used to invest in buildingconsumer demand internationally. While this will hold back profits in the shortterm, we believe that this will deliver the greatest shareholder value in themedium term and is an essential part of our strategy of building Mulberry into aglobal luxury brand. DIVIDENDS The full year dividend of 1.5 pence per ordinary share, announced with the finalresults in June 2007 was paid on 15 August 2007. The Board plan to consider adividend in respect of the current full year when the final results areavailable in June 2008. The Board is not recommending the payment of an interimdividend on the ordinary shares. STAFF As always, I would like to take this opportunity to thank all of our staff andour partners for their enthusiasm and commitment to Mulberry and its strategy.The achievements of the last six months would not have been possible withoutthem. I would also like to express my gratitude to Guy Rutherford who has been FinanceDirector for the past nine years and who has been a key member of the team thathas transformed the Company. He is moving on to a more entrepreneurial roleoutside the Group as announced on 24 August 2007. His successor, Roger Mather,is already in place after a smooth transition. Godfrey DavisChairman and Chief Executive 13 December 2007 CONDENSED CONSOLIDATED INCOME STATEMENTFor the six months to 30 September 2007 (Restated under IFRS) Unaudited Unaudited Audited six months six months year ended ended ended 30 September 30 September 31 March 2007 2006 2007 Note £'000 £'000 £'000 REVENUE 21,517 20,655 45,078Cost of sales (9,164) (8,984) (18,818) ---------- ---------- ----------GROSS PROFIT 12,353 11,671 26,260Administrative expenses (11,264) (9,211) (19,588) ---------- ---------- ----------OPERATING PROFIT 1,089 2,460 6,672Share of results of associates 1 (234) (498)Finance income 226 137 324Finance expense (62) (140) (298) ---------- ---------- ----------PROFIT BEFORE TAXATION 1,254 2,223 6,200Taxation 3 (439) (756) (2,219) ---------- ---------- ----------PROFIT FOR THE PERIOD 815 1,467 3,981 ========== ========== ========== ATTRIBUTABLE TO:Equity holders of the parent 815 1,467 3,981 ========== ========== ========== pence pence pence Basic earnings per share 4 1.4 3.0 8.1 Diluted earnings per share 4 1.4 2.8 7.4 CONDENSED CONSOLIDATED BALANCE SHEETAt 30 September 2007 (Restated under IFRS) Unaudited Unaudited Audited 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000ASSETSNON-CURRENT ASSETSIntangible assets 1,872 41 1,587Property, plant and equipment 7,789 6,182 6,997Interests in associates 164 435 152Deferred tax assets 151 474 174 ---------- ---------- ---------- 9,976 7,132 8,910 CURRENT ASSETSInventories 7,085 6,508 6,688Trade and other receivables 5,828 5,327 3,869Cash and equivalents 7,609 6,959 10,271 ---------- ---------- ---------- 20,522 18,794 20,828 ---------- ---------- ----------TOTAL ASSETS 30,498 25,926 29,738 ========== ========== ========== LIABILITIESCURRENT LIABILITIESTrade and other payables (9,013) (8,106) (7,950)Tax liabilities (409) (758) (892)Obligations under finance leases (25) (42) (37)Bank overdrafts and loans (120) - - ---------- ---------- ---------- (9,567) (8,906) (8,879) NON-CURRENT LIABILITIESBank loans (1,130) - (1,250)Preference shares - (2,539) (2,564)Deferred tax liabilities (158) (119) (149)Obligations under finance leases (20) (45) (27) ---------- ---------- ---------- (1,308) (2,703) (3,990) ---------- ---------- ----------TOTAL LIABILITIES (10,875) (11,609) (12,869) ---------- ---------- ----------NET ASSETS 19,623 14,317 16,869 ========== ========== ========== EQUITYShare capital 2,871 2,471 2,474Share premium 7,007 4,605 4,633Revaluation reserve 33 63 49Capital redemption reserve 154 154 154Special reserve 1,467 1,467 1,467Retained earnings 8,106 5,607 8,186Forex reserve (15) (50) (94) ---------- ---------- ----------TOTAL EQUITY AND RESERVES 19,623 14,317 16,869 ========== ========== ========== CONDENSED CONSOLIDATED CASH FLOW STATEMENTFor the six months to 30 September 2007 (Restated under IFRS) Unaudited Unaudited Audited six months six months year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 1,089 2,460 6,672 OPERATING PROFIT FOR THE PERIOD ADJUSTMENTS FOR:Depreciation 614 501 1,067Loss on sale of plant and equipment - - 2Employee share-based payments (credit)/charge (49) 51 102 ---------- ---------- ----------OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING 1,654 3,012 7,843CAPITAL ---------- ---------- ----------Increase in stocks (397) (541) (721)(Increase)/decrease in debtors (1,958) (366) 1,093Increase/(decrease) in creditors 1,987 692 (289) ---------- ---------- ----------CASH GENERATED BY OPERATIONS 1,286 2,797 7,926 ---------- ---------- ----------Corporation taxes paid (890) (987) (1,987)Interest paid (54) (15) (43)Preference dividends paid (56) (98) (196) ---------- ---------- ----------NET CASH FROM OPERATING ACTIVITIES 286 1,697 5,700 ========== ========== ========== INVESTING ACTIVITIES Interest received 226 137 324Purchase of tangible fixed assets (2,505) (1,707) (2,335)Sale of tangible fixed assets - - 10Purchase of intangible assets - - (1,517) ---------- ---------- ----------NET CASH USED IN INVESTING ACTIVITIES (2,279) (1,570) (3,518) ---------- ---------- ---------- FINANCING ACTIVITIESDividends paid (861) (490) (490)Repayments of obligations under finance leases (15) (20) (43)Proceeds on issue of shares 207 60 90New bank loans raised - - 1,250 ---------- ---------- ----------NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES (669) (450) 807 ---------- ---------- ----------NET (DECREASE)/INCREASE IN CASH AND EQUIVALENTS (2,662) (323) 2,989CASH AND CASH EQUIVALENTS AT BEGINNING OF THE 10,271 7,282 7,282PERIOD ---------- ---------- ----------CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 7,609 6,959 10,271 ========== ========== ========== CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months to 30 September 2007 (Restated under IFRS) Unaudited Unaudited Audited six months six months year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 815 1,467 3,981 Net profit for the periodExchange differences on foreign currency net investments 79 (50) (94) ---------- ---------- ----------Recognised income and expense for the period 894 1,417 3,887 ========== ========== ========== CONDENSED CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITYFor the six months to 30 September 2007 (Restated under IFRS) Unaudited Unaudited Audited six months six months year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 894 1,417 3,887 Recognised income and expense for the periodOrdinary dividend paid (861) (490) (490)New shares issued 207 60 90Conversion of preference shares 2,563 - -Employee share-based payments (credit)/charge (49) 51 102Finance costs on preference shares - 2 3 ---------- ---------- ---------- 2,754 1,040 3,592 Opening equity 16,869 13,277 13,277 ---------- ---------- ----------Closing equity 19,623 14,317 16,869 ========== ========== ========== Notes to the Condensed Financial Statements 1. General information Mulberry Group plc is a company incorporated in the United Kingdom under theCompanies Act 1985. The address of the registered office is given in note 8. These condensed interim financial statements do not comprise statutory accountsunder the meaning of Section 240 of the Companies Act 1985. Statutory accountsfor the year ended 31 March 2007, as prepared under United Kingdom GenerallyAccepted Accounting Principles, were approved by the Board of Directors on 20June 2007 and delivered to the Registrar of Companies. The report of theauditors on those accounts was unqualified, did not contain an emphasis ofmatter paragraph and did not contain any statement under Section 237 (2) or (3)of the Companies Act 1985. 2. Basis of preparation The condensed consolidated financial statements have been prepared usingaccounting policies consistent with International Financial Reporting Standards(IFRS) as adopted for use in the European Union. These are the Group's first set of condensed consolidated financial statementsunder IFRS. The first full set of consolidated financial statements under IFRSwill be for the year ending 31 March 2008. The transition to IFRS has resulted in a number of changes in the reportedconsolidated financial statements, notes thereto and accounting principlescompared to previous annual reports which were prepared under applicable UnitedKingdom Generally Accepted Accounting Principles (UK GAAP). The comparativeinformation has been restated in accordance with IFRS. Note 6 provides furtherdetails on the transition from UK GAAP to IFRS. The date of transition to IFRSwas 1 April 2006 (transition date). Details of the accounting policies adoptedby the Group under IFRS are disclosed in note 7. These condensed interim financial statements are presented in pounds sterlingbecause that is the currency of the primary economic environment in which theGroup operates. Foreign operations are included in accordance with the policiesset out in note 7. The Group has elected not to comply with IAS 34 'Interim financial reporting'. At the date of authorisation of these condensed interim financial statements thefollowing Standards and Interpretations, which have not been applied in thesecondensed interim financial statements, were in issue but not yet effective: Amendment to IAS 23 'Borrowing Costs' IFRS 8 'Operating Segments'IFRIC 9 'Reassessment of Embedded Derivatives'IFRIC 10 'Interim Financial Reporting and Impairment'IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions'IFRIC 12 'Service Concession Arrangements'IFRIC 13 'Customer Loyalty Programmes'IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction'. The Directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on theconsolidated financial statements of the Group. In the current period, the Group will adopt IFRS 7 'Financial Instruments:Disclosures' for the first time. As IFRS 7 is a disclosure standard, there isno impact of that change in accounting policy on the interim consolidatedfinancial statements. Full details of the change will be disclosed in ourreport for the year ending 31 March 2008. IFRS 1 Exemptions IFRS 1, 'First-time Adoption of International Financial Reporting Standards',permits those companies adopting IFRS for the first time to take some exemptionsfrom the full requirements of IFRS in the transition period: - Business combinations - any business combinations prior to the transition date have not been restated on an IFRS basis. - Share-based payments - IFRS 2 'Share-based Payments' applies to equity instruments. This has been applied to all share options granted since 7 November 2002. All cumulative charges have been recognised in equity at the transition date. - Cumulative translation differences - the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRS. - Revaluations on property - for any property that has been previously revalued the revaluation is classed as being the fair value and therefore the deemed cost at the date of transition to IFRS. 3. Taxation The taxation charge is calculated by applying the forecast full year effectivetax rate to the interim profit. 4. Earnings per ordinary share Basic earnings per ordinary share has been calculated by dividing the profit onordinary activities after taxation for each period by the weighted averagenumber of ordinary shares in issue during the period. Diluted earnings per share has been calculated by dividing the profit onordinary activities after taxation, excluding the interest and finance costsrelating to the preference shares for each period by the weighted averagepotential ordinary shares, calculated by taking account of the potentialconversion of the preference shares and exercise of unexercised options: Unaudited Unaudited Audited six months six months year ended ended ended 30 September 30 September 31 March 2007 2006 2007 thousands thousands thousands Weighted averagenumber of sharesin issue 56,517 48,943 48,974 Weighted averagepotential ordinaryshares 56,708 57,397 57,382 5. Conversion of the B Preference shares by Challice Limited On 16 April 2007 the 8,000,000 B preference shares issued pursuant to thesubscription agreement between the Company and Challice Limited, announced on 17August 2000 and approved by shareholders on 11 September 2000, were convertedinto 8,000,000 ordinary shares of 5p each following satisfaction of the relevantconditions set out in the Company's articles of association. As a consequenceChallice Limited's shareholding in the share capital of the Company increased to34,212,144 shares. 6. Transition to IFRS As stated in note 2, these are the Group's first condensed interim financialstatements prepared in accordance with IFRS. The transition from UK GAAP to IFRS has been made in accordance with IFRS 1, 'First-time Adoption of International Financial Reporting Standards'. The following reconciliations and explanatory notes thereto describe the effectsof the transition on the IFRS opening balance sheet as at 1 April 2006 and forthe periods ending 30 September 2006 and 31 March 2007. Additionally they showthe reconciliation of the profit and loss reported under UK GAAP for the periodsended 30 September 2006 and 31 March 2007 to IFRS. All explanations should be read in conjunction with the IFRS accounting policiesof the Group as disclosed in note 7. RECONCILIATION OF UK GAAP TO IFRS CONSOLIDATED BALANCE SHEET AS AT 1 APRIL 2006 (DATE OF TRANSITION) (a) (b) (d) UK GAAP IAS 17 IAS 38 IAS 12 in IFRS Lease Reclassify Deferred format incentives software tax IFRS £'000 £'000 £'000 £'000 £'000ASSETSNON-CURRENT ASSETSIntangible assets - - 24 - 24Property, plant and equipment 5,228 - (24) - 5,204Interests in associates 730 - - - 730Deferred tax assets 277 - - 194 471 -------- -------- -------- -------- -------- 6,235 - - 194 6,429 CURRENT ASSETSInventories 5,967 - - - 5,967Trade and other receivables 4,962 - - - 4,962Cash and equivalents 7,282 - - - 7,282 -------- -------- -------- -------- -------- 18,211 - - - 18,211 -------- -------- -------- -------- --------TOTAL ASSETS 24,446 - - 194 24,640 ======== ======== ======== ======== ======== LIABILITIESCURRENT LIABILITIESTrade and other payables (7,386) (250) - - (7,636)Tax liabilities (987) - - - (987)Obligations under finance leases (42) - - - (42) -------- -------- -------- -------- -------- (8,415) (250) - - (8,665) NON-CURRENT LIABILITIESPreference shares (2,514) - - - (2,514)Deferred tax liabilities - - - (119) (119)Obligations under finance leases (65) - - - (65) -------- -------- -------- -------- -------- (2,579) - - (119) (2,698) -------- -------- -------- -------- --------TOTAL LIABILITIES (10,994) (250) - (119) (11,363) -------- -------- -------- -------- --------NET ASSETS 13,452 (250) - 75 13,277 ======== ======== ======== ======== ======== EQUITYShare capital 2,467 - - - 2,467Share premium 4,547 - - - 4,547Revaluation reserve 80 - - - 80Capital redemption reserve 154 - - - 154Special reserve 1,467 - - - 1,467Retained earnings 4,737 (250) - 75 4,562Forex reserve - - - - - -------- -------- -------- -------- --------TOTAL EQUITY AND RESERVES 13,452 (250) - 75 13,277 ======== ======== ======== ======== ======== RECONCILIATION OF UK GAAP TO IFRS CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2006 UK GAAP (a) (b) (c) (d) in IFRS IAS 17 IAS 38 IAS 21 IAS 12 format Lease Reclassify Forex Deferred incentives software reserve tax IFRS £'000 £'000 £'000 £'000 £'000 £'000ASSETSNON-CURRENT ASSETSIntangible assets - - 41 - - 41Property, plant and equipment 6,223 - (41) - - 6,182Interests in associates 435 - - - - 435Deferred tax assets 278 - - - 196 474 -------- -------- -------- -------- -------- -------- 6,936 - - - 196 7,132 CURRENT ASSETSInventories 6,508 - - - - 6,508Trade and other receivables 5,327 - - - - 5,327Cash and equivalents 6,959 - - - - 6,959 -------- -------- -------- -------- -------- -------- 18,794 - - - - 18,794 -------- -------- -------- -------- -------- --------TOTAL ASSETS 25,730 - - - 196 25,926 ======== ======== ======== ======== ======== ======== LIABILITIESCURRENT LIABILITIESTrade and other payables (7,848) (258) - - - (8,106)Tax liabilities (758) - - - - (758)Obligations under finance leases (42) - - - - (42) -------- -------- -------- -------- -------- -------- (8,648) (258) - - - (8,906) NON-CURRENT LIABILITIESPreference shares (2,539) - - - - (2,539)Deferred tax liabilities - - - - (119) (119)Obligations under finance leases (45) - - - - (45) -------- -------- -------- -------- -------- -------- (2,584) - - - (119) (2,703) -------- -------- -------- -------- -------- --------TOTAL LIABILITIES (11,232) (258) - - (119) (11,609) -------- -------- -------- -------- -------- --------NET ASSETS 14,498 (258) - - 77 14,317 ======== ======== ======== ======== ======== ======== EQUITYShare capital 2,471 - - - - 2,471Share premium 4,605 - - - - 4,605Revaluation reserve 63 - - - - 63Capital redemption reserve 154 - - - - 154Special reserve 1,467 - - - - 1,467Retained earnings 5,738 (258) - 50 77 5,607Forex reserve - - - (50) - (50) -------- -------- -------- -------- -------- --------TOTAL EQUITY AND RESERVES 14,498 (258) - - 77 14,317 ======== ======== ======== ======== ======== ======== RECONCILIATION OF UK GAAP TO IFRS CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2007 (a) (b) (c) (d) UK GAAP IAS 17 IAS 38 IAS 21 IAS 12 in IFRS Lease Reclassify Forex Deferred format incentives software reserve tax IFRS £'000 £'000 £'000 £'000 £'000 £'000ASSETSNON-CURRENT ASSETSIntangible assets 1,499 - 88 - - 1,587Property, plant and equipment 7,085 - (88) - - 6,997Interests in associates 152 - - - - 152Deferred tax assets - - - - 174 174 -------- -------- -------- -------- -------- -------- 8,736 - - - 174 8,910 CURRENT ASSETSInventories 6,688 - - - - 6,688Trade and other receivables 3,869 - - - - 3,869Cash and equivalents 10,271 - - - - 10,271 -------- -------- -------- -------- -------- -------- 20,828 - - - - 20,828 -------- -------- -------- -------- -------- --------TOTAL ASSETS 29,564 - - - 174 29,738 ======== ======== ======== ======== ======== ======== LIABILITIESCURRENT LIABILITIESTrade and other payables (7,690) (260) - - - (7,950)Tax liabilities (892) - - - - (892)Obligations under finance leases (37) - - - - (37) -------- -------- -------- -------- -------- -------- (8,619) (260) - - - (8,879) NON-CURRENT LIABILITIESBank loans (1,250) - - - - (1,250)Preference shares (2,564) - - - - (2,564)Deferred tax liabilities (53) - - - (96) (149)Obligations under finance leases (27) - - - - (27) -------- -------- -------- -------- -------- -------- (3,894) - - - (96) (3,990) -------- -------- -------- -------- -------- --------TOTAL LIABILITIES (12,513) (260) - - (96) (12,869) -------- -------- -------- -------- -------- --------NET ASSETS 17,051 (260) - - 78 16,869 ======== ======== ======== ======== ======== ======== EQUITYShare capital 2,474 - - - - 2,474Share premium 4,633 - - - - 4,633Revaluation reserve 49 - - - - 49Capital redemption reserve 154 - - - - 154Special reserve 1,467 - - - - 1,467Retained earnings 8,274 (260) - 94 78 8,186Forex reserve - - - (94) - (94) -------- -------- -------- -------- -------- --------TOTAL EQUITY AND RESERVES 17,051 (260) - - 78 16,869 ======== ======== ======== ======== ======== ======== RECONCILIATION OF UK GAAP CONSOLIDATED PROFIT AND LOSS ACCOUNT TO IFRS CONSOLIDATED INCOME STATEMENT FOR THE SIXMONTHS ENDED 30 SEPTEMBER 2006 (a) (d) UK GAAP IAS 17 IAS 12 in IFRS Lease Deferred IFRS format incentives tax (restated) £'000 £'000 £'000 £'000 REVENUE 20,655 - - 20,655Cost of sales (8,984) - - (8,984) -------- -------- -------- --------GROSS PROFIT 11,671 - - 11,671Administrative expenses (9,203) (8) - (9,211) -------- -------- -------- --------OPERATING PROFIT 2,468 (8) - 2,460Share of results of associates (234) - - (234)Finance income 137 - - 137Finance expense (140) - - (140) -------- -------- -------- --------PROFIT BEFORE TAXATION 2,231 (8) - 2,223Taxation (758) - 2 (756) -------- -------- -------- --------PROFIT FOR THE PERIOD 1,473 (8) 2 1,467 ======== ======== ======== ======== ATTRIBUTABLE TO:Equity holders of the parent 1,473 (8) 2 1,467 ======== ======== ======== ======== RECONCILIATION OF UK GAAP CONSOLIDATED PROFIT AND LOSS ACCOUNT TO IFRS CONSOLIDATED INCOME STATEMENT FOR THE YEARENDED 31 MARCH 2007 (a) (d) UK GAAP IAS 17 IAS 12 in IFRS Lease Deferred IFRS format incentives tax (restated) £'000 £'000 £'000 £'000 REVENUE 45,078 - - 45,078Cost of sales (18,818) - - (18,818) -------- -------- -------- --------GROSS PROFIT 26,260 - - 26,260Administrative expenses (19,578) (10) - (19,588) -------- -------- -------- --------OPERATING PROFIT 6,682 (10) - 6,672Share of results of associates (498) - - (498)Finance income 324 - - 324Finance expense (298) - - (298) -------- -------- -------- --------PROFIT BEFORE TAXATION 6,210 (10) - 6,200Taxation (2,222) - 3 (2,219) -------- -------- -------- --------PROFIT FOR THE PERIOD 3,988 (10) 3 3,981 ======== ======== ======== ======== ATTRIBUTABLE TO:Equity holders of the parent 3,988 (10) 3 3,981 ======== ======== ======== ======== Notes to the IFRS transition statements a. Under UK GAAP lease incentives were recognised over the period to the firstmarket rent review or the end of the lease whichever is the shorter period.Under IFRS lease incentives are required to be recognised over the entire leaseterm. As a result the Group's IFRS opening balance sheet as at 1 April 2006 includesadditional deferred lease incentives income of £250k and an associated tax assetadjustment of £75k. In respect of the six months ended 30 September 2006 and theyear ended 31 March 2007 adjustments have been made to decrease the deferredlease incentives amortisation by a further £8k and £10k respectively, with anassociated deferred tax adjustment of £2k and £3k respectively. b. Under IFRS, computer software is classified as an intangible asset 'wherethe software is not an integral part of the related hardware'. This means thatapplication software costs that have been capitalised as tangible fixed assetsmust now be reclassified to intangible assets. The effect is to increase theintangible assets and reduce property, plant and equipment by £24k, £41k and£88k being the net book value of software at 1 April 2006, 30 September 2006 and31 March 2007 respectively. c. Under IFRS, cumulative translation differences that arise on translation offoreign operations are shown as a separate reserve within equity. d. This is the tax effect of the adjustments (a) to (c). 7. Accounting policies Basis of consolidation The condensed consolidated financial statements incorporate the financialstatements of the Company and entities controlled by the Company (itssubsidiaries) made up to 31 March each year. Control is achieved where theCompany has the power to govern the financial and operating policies of eachinvestee entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of in any year are included inthe consolidated profit and loss account from the date of acquisition or up tothe date of disposal. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Goodwill Goodwill written off to reserves under UK GAAP prior to 1998 has not beenreinstated and is not included in determining any subsequent profit or loss ondisposal. Intangible assets Intangible assets that are acquired by the Group are stated at cost lessaccumulated amortisation. Amortisation is charged to the income statement overthe estimated useful life of the asset. Computer software that is integral to a related item of hardware is included asproperty, plant and equipment. All other computer software is recorded as anintangible asset. Property, plant and equipment Items of property, plant and equipment are stated at cost or deemed cost lessaccumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets,other than land and properties under construction, over their estimated usefullives, using the straight-line method, on the following bases: Freehold buildings 5%Short leasehold land and buildings over the term of the leaseFixtures, fittings and equipment 10% to 33%Plant and equipment 20%Motor vehicles 25% Assets held under finance leases are depreciated over their expected usefullives on the same basis as owned assets or, where shorter, over the term of therelevant lease. The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theasset and is recognised in income. Assets in the course of construction are not depreciated. Depreciation on theseassets commences when the assets are ready for intended use. Impairment of tangible and intangible assets At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. Investments in subsidiary undertakings and associates Investments in subsidiaries are stated at cost less provision for any impairmentin value. An associate is an entity over which the Group is in a position to exercisesignificant influence. The results and assets and liabilities of associates areincorporated in these financial statements using the equity method ofaccounting. Investments in associates are carried in the balance sheet at costas adjusted by post-acquisition changes in the Group's share of the net assetsof the associate, less any impairment in the value of individual investments.Losses of the associates in excess of the Group's interest in those associatesare not recognised. Any excess of the cost of acquisition over the Group's share of the fair valuesof the identifiable net assets of the associate at the date of acquisition isrecognised as goodwill. Any deficiency of the cost of acquisition below theGroup's share of the fair values of the identifiable net assets of the associateat the date of acquisition (i.e. discount on acquisition) is credited in profitor loss in the period of acquisition. Inventories Inventories are stated at the lower of cost and net realisable value. Costcomprises materials, direct labour costs and those overheads incurred inbringing the inventories to their current location and condition. Cost iscalculated using the standard cost method. Net realisable value represents theestimated selling price less all estimated costs of completion and costs to beincurred in marketing, selling and distribution. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it isprobable that taxable profits will be available against which deductibletemporary differences can be utilised. Such assets and liabilities are notrecognised if the temporary difference arises from the initial recognition ofgoodwill or from the initial recognition (other than in a business combination)of other assets and liabilities in a transaction that affects neither the taxprofit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority andthe Group intends to settle its current tax assets and liabilities on a netbasis. Retirement benefit costs Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. Payments made to state-managed retirement benefitschemes are dealt with as payments to defined contribution schemes where theGroup's obligations under the schemes are equivalent to those arising in adefined contribution retirement benefit scheme. Research and development Expenditure on research is written off against profits as incurred. Wheredevelopment expenditure meets the criteria of IAS 38, such expenditure iscapitalised and amortised over its useful life. Foreign currencies The individual financial statements of each Group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each Group company are expressed in poundssterling, which is the functional currency of the Company, and the presentationcurrency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactionsin currencies other than the entity's functional currency (foreign currencies)are recorded at the rates of exchange prevailing on the dates of thetransactions. At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at the rates prevailingon the balance sheet date. Non-monetary items carried at fair value that aredenominated in foreign currencies are translated at the rates prevailing at thedate when the fair value was determined. Non-monetary items that are measured interms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on theretranslation of monetary items, are included in profit or loss for the period.Exchange differences arising on the retranslation of non-monetary items carriedat fair value are included in profit or loss for the period except fordifferences arising on the retranslation of non-monetary items in respect ofwhich gains and losses are recognised directly in equity. For such non-monetaryitems, any exchange component of that gain or loss is also recognised directlyin equity. For the purpose of presenting consolidated financial statements, the assets andliabilities of the Group's foreign operations are translated at exchange ratesprevailing on the balance sheet date. Income and expense items are translated atthe average exchange rates for the period, unless exchange rates fluctuatesignificantly during that period, in which case the exchange rates at the dateof the transactions are used. Exchange differences arising, if any, areclassified as equity and transferred to the Group's translation reserve. Suchtranslation differences are recognised as income or as expenses in the period inwhich the operation is disposed of. Operating profit Operating profit is stated after charging restructuring costs but before theshare of results of associates, investment income and finance costs. Financial instruments Financial assets and financial liabilities are recognised in the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and othershort-term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis in profit or loss using the effective interest rate method and areadded to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise. Convertible redeemable preference shares Convertible preference shares are regarded as compound instruments, consistingof a liability component and an equity component. At the date of issue, the fairvalue of the liability component is estimated using the prevailing marketinterest rate for similar non-convertible debt. The difference between theproceeds of issue of the convertible preference shares and the fair valueassigned to the liability component, representing the embedded option to convertthe liability into equity of the Group, is included in equity. Issue costs are apportioned between the liability and equity components of theconvertible preference shares based on their relative carrying amounts at thedate of issue. The portion relating to the equity component is charged directlyagainst equity. Trade payables Trade payables are not interest-bearing and are stated at their nominal value. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. Revenue recognition Revenue represents amounts receivable for goods and services provided in thenormal course of business, net of discounts, VAT and other sales-related taxesand intra-group transactions. Sales of goods are recognised when goods aredelivered and title has passed. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount. Royalty income is accrued on a time basis as the income is earned. Leases Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation.Lease payments are apportioned between finance charges and reduction of thelease obligation so as to achieve a constant rate of interest on the remainingbalance of the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operatinglease are also spread on a straight-line basis over the lease term. Provisions A provision is recognised when the Group has a present legal or constructiveobligation as a result of a past event, and where it is probable that an outflowwill be required to settle the obligation. Provisions are measured at theDirectors' best estimate of the expenditure required to settle the obligation atthe balance sheet date and are discounted to present value where the effect ismaterial. Share-based payments The Group has applied the requirements of 'IFRS 2 Share-based payments' to allgrants of equity instruments after 7 November 2002 that were unvested at 1 April2006. The Group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value (excluding theeffect of non market-based vesting conditions) at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments isexpensed on a straight-line basis over the vesting period, based on the Group'sestimate of shares that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions. Fair value is measured by use of the Black Scholes model. The expected lifeused in the model has been adjusted, based on management's best estimate, forthe effects of non-transferability, exercise restrictions, and behaviouralconsiderations. 8. Approval and distribution This report was approved by the Board of Directors on 12 December 2007 and isbeing sent to all shareholders. Copies are available on the Group's website(www.mulberrygroupplc.com) or from the Company Secretary at the Company'sregistered office: The RookeryChilcomptonBathSomersetBA3 4EH INDEPENDENT REVIEW REPORT TO THE MEMBERS OF MULBERRY GROUP PLC We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the consolidated income statement, theconsolidated balance sheet, the consolidated cash flow statement, theconsolidated statement of recognised income and expense, the consolidatedreconciliation of movements in equity, and related notes 1 to 7. We have readthe other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the Company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the half-yearlyfinancial report in accordance with the AIM Rules of the London Stock Exchange. As disclosed in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport have been prepared in accordance with the accounting policies the Groupintends to use in preparing its next annual financial statements. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. The interim results for the six months ended 30 September 2006 have notpreviously been reported on as the Directors took the option not to have areview completed. Accordingly, we have not reviewed the comparative informationfor the six months ended 30 September 2006. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with the AIM Rules of the London StockExchange. Deloitte & Touche LLPChartered Accountants and Registered AuditorBristol, UK 13 December 2007 This information is provided by RNS The company news service from the London Stock Exchange