Last checked at 19 Jun 2008 07:00
MULBERRY GROUP PLC
19 JUNE 2008
MULBERRY GROUP PLC ("Mulberry" or the "Group")
PRELIMINARY RESULTS FOR
THE YEAR TO 31 MARCH 2008
Mulberry Group Plc, the AIM listed luxury brand announced sales growth of 14% to £51.2 million (2007: £45.1 million) and profit before tax slightly ahead of market expectations of £5.2 million (2007: £6.2 million). This was the fifth successive year of sales growth. The rate of growth accelerated through the year with global sales in the second half 22% up on the same period last year.
As indicated at the beginning of the year the decrease in profit was due to the additional marketing investment in building Mulberry as a global brand.
HIGHLIGHTS
Sales increased by 14% to £51.2 million (2007: £45.1 million)
UK retail sales growth of 29%, like for like growth of 10%
8 Mulberry shops and 6 department store concessions opened worldwide during the year
Marketing expenditure increased by £2.1 million to £4.8 million
Cash net of bank borrowings of £10.2 million (2007: £9.0 million)
Positive current trading outlook - strong order books and UK retail sales 36% ahead for the first ten weeks (like for like sales up 17%)
Dividend increased by 33% to 2 pence per share (2007: 1.5 pence)
GODFREY DAVIS, CHAIRMAN AND CHIEF EXECUTIVE COMMENTED:
"We have achieved another year of strong sales growth, delivering an increase of 14% for the year. These results reflect the continued investment in the brand. With our substantial cash resources, we are well placed to continue to build Mulberry as a global brand. The new financial year has started strongly."
FOR FURTHER DETAILS PLEASE CONTACT:
Pelham PR
David Wynne-Morgan 0203 178 4416
Kate Catchpole 0207 743 6678
Landsbanki Securities (UK) Ltd
Rashmi Sinha/Fred Walsh 0207 426 9000
CHAIRMAN'S STATEMENT
The Group has completed a successful year with sales growth of 14% to £51.2 million (2007: £45.1 million). The rate of growth accelerated through the year with sales in the second half increasing by 22% compared to the same period in 2007.
Profit before tax was ahead of market expectations at £5.2 million (2007: £6.2 million) and a final dividend of 2 pence per share is being recommended (2007: 1.5 pence).
We continue to invest in the business both in the UK and internationally, using the retained profits and cash flow to invest in the opening of new shops and to significantly increase the expenditure on marketing. This strategy reduces profits in the short term, as we spend today to build for the future, but is the key to developing future shareholder value.
The Group's balance sheet has strengthened further during the year, with shareholders' funds rising by 33% to £22.5 million (2007: £16.9 million). Cash generation continues to be strong and at 31 March 2008 the Group had cash net of bank borrowings of £10.2 million (2007: £9.0 million). Group stocks of prior season items are at low levels. The combination of this strong stock and cash position means that the Group is able to pursue its growth objectives without being constrained by the difficult economic climate.
BUSINESS REVIEW
Accessories remain our core business and continue to account for over 90% of Group sales. The iconic Bayswater handbag continues to sell strongly supported by the new Mabel and Roxanne Tote handbags which have joined the bestseller lists. The design team has been successful in broadening our product offer to meet the specific requirements of our emerging markets in the USA, Asia and the Middle East.
We have continued the expansion of our own retail network in the UK, where we have opened shops in Glasgow, Covent Garden, Stansted Airport and Heathrow Terminal 5, as well as four concessions in House of Fraser department stores and a new outlet store in Cheshire Oaks, near Liverpool.
For the year to 31 March 2008 sales from our UK shops, which benefited from the full year trading of the shops opened last year and the new openings this year, increased by 29% and like for like sales for the same period increased by 10%.
Our associate company, Mulberry USA LLC opened its fifth store during May 2007. The five stores have incurred start up losses as expected, but sales are growing as they build consumer awareness. This is a long term project. We plan to build the individual existing shops to profitability and there is potential to open further shops, which will enable the USA business to reach critical mass and cover its head office management costs. Our sales from the UK to the USA dipped slightly in the year following the initial input of stock to start up the shops in the prior year.
In Asia, the shops run by our partner, Club 21, continue to develop satisfactorily. New shops were opened in Terminal 3 at Changi Airport, Singapore, and in the Elements development in Hong Kong, bringing the total number of Mulberry shops operated by Club 21 to seven. In Korea, business with our partner SHK has made good progress with the opening of two additional department store shop in shops, bringing the total to four. Aggregate sales to the Asian markets have started to grow in the second half as sales move beyond the initial orders for the stock required to open the shops.
CURRENT TRADING AND OUTLOOK
The sales growth experienced during the six months to 31 March 2008 has continued into the new financial year. Confirmed orders for sales to third parties for the Autumn/Winter 08 season are more than 30% ahead of last year. In the first ten weeks of the new financial year, total retail sales in the UK are running 36% above prior year with like for like sales up 17%. This is a very encouraging start to the new financial year. However, economic conditions are concerning and we remain cautious, particularly in the light of cost inflation in the supply chain which will put pressure on our margins.
This autumn we will be introducing an exciting new line of women's shoes exclusively in the Mulberry shops. Distribution of this line will be restricted to Mulberry shops for the first two to three seasons.
We continue to expand the business both in the UK and internationally. During May 2008, we have opened a new shop in Leeds and reopened our original shop in St Christopher's Place, London, after refurbishment. During the autumn, we will open a new store in the luxury mall development at White City, London.
We have appointed a new partner for Greece and a new shop will open in Athens later this year. Our existing partner in Denmark will open a new shop at Copenhagen Airport this summer to build on their extremely successful business.
In Asia, a new shop opened in Shanghai during April and our partner in Korea plans to open two more department store shop in shops during the autumn. Business through our partner in Japan has not met our requirements for growth and market penetration. We have agreed to terminate the arrangement during January 2009. We will develop a new approach to this market in due course.
In the Middle East our partner plans to open in Dubai, Jeddah and Kuwait by the end of the year.
The next project in the USA is to extend our website to trade in US dollars.
As a consequence of our business expansion, we have outgrown our London office and showroom premises and so are planning to relocate before the end of the financial year.
DIVIDENDS
The Board is recommending the payment of a final dividend on the ordinary shares of 2 pence per share (2007: 1.5 pence) which will be paid on 15 August 2008 to ordinary shareholders on the register on 18 July 2008.
STAFF
I would like to thank all of our staff for their enthusiasm and commitment which are so important to the brand's future development. The achievements of the last year are a direct result of their efforts and would not have been possible without them.
Godfrey Davis
Chairman and Chief Executive
18 June 2008
FINANCIAL REVIEW
Gross margin
Group gross profit as a percentage of revenue was 60% compared to 58% in 2007. This increase reflects the change in sales mix, where there has been an increase in the proportion of Retail sales against Design sales.
OPERATING EXPENSES
Operating expenses for the year increased by £6.2 million to £25.8 million (2007: £19.6 million). This increase reflects the planned £2.1 million of extra marketing investment in building the international Mulberry brand and £2.8 million additional costs associated with the expanding retail network in the UK and France.
SHARE OF RESULTS OF ASSOCIATES
Income of £0.1 million has been recognised in the year in relation to the Group's investment in Mulberry Oslo AS, which operates a retail store in Norway. In the prior year losses included £0.5 million of start-up losses for Mulberry USA LLC.
FINANCE INCOME AND EXPENSE
The increase in net finance income of £0.3 million has resulted from the conversion of the B preference shares (see below) and the increase in cash balances held on deposit throughout the year.
Taxation
The Group reported a 33.7% effective tax rate (2007: 35.8%) on profit before tax, resulting in a tax charge of £1.8 million (2007: £2.2 million). The effective rate has declined due to the reduction in expenses not deductible for tax purposes. During 2007, the disallowable expenditure included the £0.1 million charge for share based payments and the Group's share of losses in Mulberry USA LLC of £0.5 million.
Balance Sheet
Capital expenditure on tangible fixed assets for the year totaled £2.6 million (2007: £2.8 million) and included the fit out of the new stores opened during the year. The expenditure of £0.4 million on intangible fixed assets reflects the ongoing investment in the Group's new ERP system.
Stock levels increased by £1.1 million to £7.8 million resulting from the growth of the business and the additional stock held at the new retail outlets.
Cashflow
The principal source of funds was cash flow generated from operations which amounted to £6.1 million (2007: £7.9 million) during the year. The cash balance has remained stable at £10.2 million.
A property loan of £1.25 million was repaid during February 2008. The Group had further committed but unutilised facilities of £6.25 million at the end of the year comprising a £3.5 million multicurrency overdraft which is renewable annually and a revolving credit facility of £2.75 million which expires during June 2009.
Shareholder return
The basic earnings per share for the year declined by 26% to 6.0p. This reflects the increase in the number of shares resulting from the preference share conversion during April 2007 and the lower profit after tax generated during the year due to the additional spend on marketing and store expansion.
Conversion of the B preference shares
On 16 April 2007, at the request of the shareholder, Challice Limited, as the relevant conditions set out in the Company's Articles of Association had been met, the Company converted 8,000,000 B preference shares of 5p each issued to Challice Limited to 8,000,000 ordinary shares of 5p each. This increased Challice Limited's holding to 34,212,144 shares which is 59.6% of the issued share capital of the Company.
Adoption of International Financial Reporting Standards ('IFRS')
This is the Group's first set of consolidated financial statements prepared under IFRS. The transition to IFRS has resulted in a number of immaterial numerical adjustments to the previously reported consolidated financial statements which were prepared under United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS.
| CONSOLIDATED INCOME STATEMENT Year ended 31 March 2008 | ||||
| 2008 | 2007 | |||
|
| £'000 | £'000 | ||
| Revenue | 51,174 | 45,078 | ||
| Cost of sales | (20,622) | (18,818) | ||
| ---------- | ---------- | |||
| GROSS PROFIT | 30,552 | 26,260 | ||
| Administrative expenses | (25,979) | (19,804) | ||
| Other operating income | 201 | 216 | ||
| ---------- | ---------- | |||
| OPERATING PROFIT | 4,774 |
6,672 | ||
| Share of results of associates | 63 | (498) | ||
| Finance income | 473 | 324 | ||
| Finance expense | (124) | (298) | ||
| ---------- | ---------- | |||
| PROFIT BEFORE TAX | 5,186 | 6,200 | ||
| Tax | (1,750) | (2,219) | ||
| ---------- | ---------- | |||
| PROFIT FOR THE YEAR | 3,436 | 3,981 | ||
| ========== | ========== | |||
| ATTRIBUTABLE TO: | ||||
| Equity holders of the parent | 3,436 | 3,981 | ||
| ========== | ========== | |||
| pence | pence | |||
| Basic earnings per share | 6.0 | 8.1 | ||
| Diluted earnings per share | 6.0 | 7.4 | ||
| CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year ended 31 March 2008 | ||||
| 2008 | 2007 | |||
|
| £'000 | £'000 | ||
| Net profit for the year | 3,436 | 3,981 | ||
| Exchange differences on translation of foreign operations | 309 | (94) | ||
| ---------- | ---------- | |||
| TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR | 3,745 | 3,887 | ||
| ========== | ========== | |||
| ATTRIBUTABLE TO: | ||||
| Equity holders of the parent | 3,745 | 3,887 | ||
| ========== | ========== |
| CONSOLIDATED BALANCE SHEET At 31 March 2008 | |||
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| NON-CURRENT ASSETS |
| ||
| Intangible assets | 2,095 | 1,587 | |
| Property, plant and equipment | 8,454 | 6,997 | |
| Interests in associates | 242 | 152 | |
| Deferred tax asset | - | 174 | |
| ---------- | ---------- | ||
| 10,791 | 8,910 | ||
| ---------- | ---------- | ||
| CURRENT ASSETS | |||
| Inventories | 7,785 | 6,688 | |
| Trade and other receivables | 5,548 | 3,869 | |
| Cash and cash equivalents | 10,237 | 10,271 | |
| ---------- | ---------- | ||
| 23,570 | 20,828 | ||
| ---------- | ---------- | ||
| TOTAL ASSETS | 34,361 | 29,738 | |
| ---------- | ---------- | ||
| CURRENT LIABLITIES | |||
| Trade and other payables | (10,894) | (7,950) | |
| Current tax liabilities | (917) | (892) | |
| Obligations under finance leases | (10) | (37) | |
| ---------- | ---------- | ||
| (11,821) | (8,879) | ||
| NON-CURRENT LIABILITIES | |||
| Borrowings | - | (1,250) | |
| Preference shares | - | (2,564) | |
| Deferred tax liabilities | (17) | (149) | |
| Obligations under finance leases | (4) | (27) | |
| ---------- | ---------- | ||
| (21) | (3,990) | ||
| ---------- | ---------- | ||
| TOTAL LIABILITIES | (11,842) | (12,869) | |
| ---------- | ---------- | ||
| NET ASSETS | 22,519 | 16,869 | |
| ========== | ========== | ||
| EQUITY | |||
| Share capital | 2,871 | 2,474 | |
| Share premium account | 7,007 | 4,633 | |
| Revaluation reserves | 18 | 49 | |
| Capital redemption reserve | 154 | 154 | |
| Special reserve | 1,467 | 1,467 | |
| Foreign exchange reserve | 215 | (94) | |
| Retained earnings | 10,787 | 8,186 | |
| ---------- | ---------- | ||
| TOTAL EQUITY | 22,519 | 16,869 | |
| ========== | ========== |
| CONSOLIDATED CASH FLOW STATEMENT At 31 March 2008 | |||
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| OPERATING PROFIT FOR THE YEAR | 4,774 | 6,672 | |
| ADJUSTMENTS FOR: | |||
| Depreciation of property, plant and equipment | 1,231 | 999 | |
| Impairment of property, plant and equipment | - | 37 | |
| Amortisation of intangible assets | 137 | 31 | |
| Loss on sale of property, plant and equipment | 12 | 2 | |
| Effects of foreign exchange | (61) | - | |
| Share based payments (credit)/charge | (5) | 102 | |
| ---------- | ---------- | ||
| OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL |
6,088 | 7,843 | |
| Increase in stocks | (1,097) | (721) | |
| (Increase)/decrease in debtors | (1,679) | 1,093 | |
| Increase/(decrease)in creditors | 2,772 | (289) | |
| ---------- | ---------- | ||
| CASH GENERATED BY OPERATIONS | 6,084 | 7,926 | |
| Corporation taxes paid | (1,685) | (1,987) | |
| Interest paid | (121) | (43) | |
| Preference dividends paid | (56) | (196) | |
| ---------- | ---------- | ||
| NET CASH FROM OPERATING ACTIVITIES | 4,222 | 5,700 | |
| ---------- | ---------- | ||
| INVESTING ACTIVITIES: | |||
| Interest received | 473 | 324 | |
| Purchases of property, plant and equipment | (2,418) | (2,335) | |
| Proceeds from sale of property, plant and equipment | 32 | 10 | |
| Acquisition of intangible fixed assets | (389) | (1,517) | |
| ---------- | ---------- | ||
| NET CASH USED IN INVESTING ACTIVITIES | (2,302) | (3,518) | |
| ---------- | ---------- | ||
| FINANCING ACTIVITIES: | |||
| Dividends paid | (861) | (490) | |
| Repayments of borrowings | (1,250) | - | |
| Repayments of obligations under finance leases | (50) | (43) | |
| Proceeds on issue of shares | 207 | 90 | |
| New bank loans raised | - | 1,250 | |
| ---------- | ---------- | ||
| NET CASH FROM FINANCING ACTIVITIES | (1,954) | 807 | |
| ---------- | ---------- | ||
| NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (34) | 2,989 | |
| Cash and cash equivalents at beginning of year | 10,271 | 7,282 | |
| ---------- | ---------- | ||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | 10,237 | 10,271 | |
| ========== | ========== |
NOTES
1. BASIS OF PREPARATION
The financial information in this announcement, which was approved by the Board of Directors on 18 June 2008, does not constitute the Company's statutory accounts for the year ended 31 March 2008 or the year ended 31 March 2007, but is derived from these accounts.
Statutory accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies and those for the year ended 31 March 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
Whilst the financial information included in this preliminary announcement has been completed in accordance with International Financial Reporting Standards (IFRSs), this announcement itself does not contain sufficient information to comply with IFRSs.
2. ACCOUNTING POLICIES
The Group's financial statements for the year ended 31 March 2008 are the first to be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union.
Details of the changes in accounting policies arising from the adoption of IFRS, together with the restated information for the year ended 31 March 2007, were included within the Group's Interim Statement for the period to 30 September 2007.
3. EARNINGS PER SHARE
Basic earnings per ordinary share has been calculated by dividing the profit for the year by 56,968,275 (2007: 48,974,442) 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 for the year excluding the interest and finance costs relating to the preference shares by 57,832,347 (2007: 57,381,518) potential ordinary shares. These shares take into account the exercise of unexercised options and the diluting effect of the preference shares prior to their conversion in April 2007.
4. DIVIDENDS
The dividends approved and paid during the year are as follows:
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| 1.5p (2007: 1p) per share on 5p ordinary shares | 861 | 490 | |
| ========== | ========== |
The directors are recommending the payment of a final dividend of 2.0p per ordinary share (2007: 1.5p) to be paid on 15 August 2008 to ordinary shareholders on the register as at 18 July 2008. This proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability.
5. STATEMENT OF RESERVES
| Share capital | Share premium | Revaluat-ion reserve | Capital redempti-on reserve | Special reserve | Foreign exchange reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 April 2007 | 2,474 | 4,633 | 49 | 154 | 1,467 | (94) | 8,186 | 16,869 |
| Charges for employee share based payments | - | - | - | - | - | - | (5) | (5) |
| New shares issued | 20 | 187 | - | - | - | - | - | 207 |
| Conversion of preference shares | 377 | 2,187 | - | - | - | - | - | 2,564 |
| Amortisation of revaluation surplus | - | - | (31) | - | - | - | 31 | - |
| Currency translation differences | - | - | - | - | - | 309 | - | 309 |
| Profit for the year | - | - | - | - | - | - | 3,436 | 3,436 |
| Ordinary dividends paid | - | - | - | - | - | - | (861) | (861) |
| ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | |
| Balance at 31 March 2008 | 2,871 | 7,007 | 18 | 154 | 1,467 | 215 | 10,787 | 22,519 |
| ===== | ===== | ===== | ===== | ===== | ===== | ===== | ===== |
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 The Rookery, Chilcompton, Somerset, BA3 4EH.
Copies of this announcement are available for a period of one month from the date hereof from the Company's registered office, and from the Company's nominated adviser, Landsbanki Securities (UK) Ltd, Beaufort House, 15 St Botolph Street, London, EC3A 7QR.