Interim results for 26 weeks ended 29 September Brand repositioning underway, with strong initial response

Transcription

1 8 November Burberry Group plc Interim results for 26 weeks ended 29 September Brand repositioning underway, with strong initial response We are energised by the early results as we begin to transform and reposition Burberry. The initial response from influencers, press, buyers and customers to our new creative vision and Riccardo s debut collection Kingdom has been exceptional. Mindful that we are only in the first phase of our multi-year plan, we continue to manage dynamically through the transition. We confirm our outlook for the full year. Marco Gobbetti, Chief Executive Officer million 29 Sept 30 Sept % change Period ended: reported FX CER # Revenue 1,220 1,263 (3) (2) Revenue ex. Beauty wholesale* 1,220 1, Retail comparable store sales* 3% 4% Adjusted operating profit* (4) 8 Adjusted operating profit margin 14.6% 14.6% Reported operating profit Adjusted Diluted EPS (pence)* Diluted EPS (pence) Free cash flow* Dividend (pence) *See page 11 for definitions of alternative performance measures Exceptional response to new creative vision, including rebranding and Riccardo s debut collection Successful launch of new go-to-market model, with social selling innovation contributing to building brand heat Consumer perception shifting; significant increase in engagement on Instagram and WeChat. Organic endorsement from some of the world s most followed influencers Strong wholesale response to new product; distribution headwind through to FY 2020, as guided, with majority of negotiations now completed Managing business dynamically in period of transition to deliver financial objectives and protect the brand Outlook Maintaining FY 2019 guidance including delivery of cumulative cost savings of 100m The financial information contained herein is unaudited. 1

2 All metrics and commentary in the Interim Review exclude adjusting items unless stated otherwise. # Constant exchange rates (CER) removes the effect of changes in exchange rates compared to the prior period. This takes into account both the impact of the movement in exchange rates on the translation of overseas subsidiaries results and also on foreign currency procurement and sales through the Group's UK supply chain. With effect from 1 April, Burberry is preparing its full year consolidated financial statements to a Saturday within seven days of the 31 March. The 26-week period ended 29 September has one fewer day than the prior year comparative period ended. For more detail please see page 9. The following alternative performance measures are presented in this announcement: adjusted performance measures, comparable sales, revenue excluding Beauty wholesale and free cash flow. The definitions of these alternative performance measures are set out in the Appendix on page 11. Cumulative cost savings are savings compared to FY 2016 operating expenses. Certain financial data within this announcement have been rounded. Enquiries Investors and analysts Charlotte Cowley VP, Investor Relations charlotte.cowley@burberry.com Annabel Gleeson Director, Investor Relations annabel.gleeson@burberry.com Media Andrew Roberts VP, Corporate Relations andrew.roberts@burberry.com There will be a presentation today at 9.30am (UK time) for investors and analysts at Horseferry House, Horseferry Road, London, SW1P 2AW The presentation can be viewed live on the Burberry website and can also be accessed live via a listen only dial-in facility on +44 (0) The supporting slides and an indexed replay will be available on the website later in the day Burberry will update on third quarter trading on 23 January 2019 Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. Burberry Group plc undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. Nothing in this announcement should be construed as a profit forecast. All persons, wherever located, should consult any additional disclosures that Burberry Group plc may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction. Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index. ADR symbol OTC:BURBY. BURBERRY, the Equestrian Knight Device, the Burberry Check, and the Thomas Burberry Monogram and Print are trademarks belonging to Burberry. 2

3 INTERIM REVIEW FOR 26 WEEKS ENDED 29 SEPTEMBER Group financial highlights Revenue excluding Beauty wholesale revenue +4% at CER, +3% reported Retail comparable store sales +3% (Q1 and Q2: +3%) Total revenue 1,220m, -2% at CER and -3% reported Adjusted operating profit 178m, +8% at CER, -4% reported Broadly stable gross margin at CER, whilst operating expenses benefited from cumulative cost savings of 80m and some phasing of costs between halves Reported operating profit 173m, +36% after adjusting operating items of 5m (H1 : 58m) and a 22m headwind from currency Adjusted diluted EPS 32.9p, +14% at CER, +2% reported supported by the repurchase of 16m shares in the last twelve months and a 100bps reduction in the effective tax rate. Reported diluted EPS 31.6p, +48%, with adjusting items reducing by 53m year-onyear Free cash flow of 46m (H1 : 171m) largely impacted by an inventory outflow reflecting the ongoing product transition and a seasonal build. Net cash of 647m at Sept ( 654m at Sept ) after returning 276m cash to shareholders through a combination of dividends ( 126m) and share buyback ( 150m) Interim dividend stable year-on-year at 11.0p (H1 : 11.0p) Summary income statement Period ended 29 Sept 30 Sept % change million reported FX CER Revenue 1,220 1,263 (3) (2) Cost of sales (395) (389) 1 Gross profit (6) Gross margin % 67.6% 69.2% Operating expenses* (647) (689) (6) Opex as a % of sales 53.0% 54.6% Adjusted operating profit* (4) 8 Adjusted operating margin % 14.6% 14.6% Adjusting operating items (5) (58) Operating profit Net finance credit ~ 1 1 Profit before taxation Taxation (42) (35) Non-controlling interest - - Attributable profit Adjusted profit before taxation* (4) 8 Adjusted EPS (pence)*^ EPS (pence)^ Weighted average diluted number of ordinary shares (millions) * Excludes adjusting items. ~ Includes adjusting finance charge of 1m (H1 : 2m). ^ EPS is presented on a diluted basis 3

4 BUSINESS AND FINANCIAL REVIEW We made good progress in the half as we began to transform and reposition Burberry, while maintaining our focus on financial and operational discipline. Under the direction of Riccardo Tisci, we introduced a new logo, for the first time in 20 years, evoking the new spirit, mood and personality of the brand, and a refreshed Thomas Burberry monogram inspired by our heritage. We rolled these out in surprising, engaging and impactful ways in key cities and in image-driving print and digital media. We reached millions of consumers directly across these activations and the effect was amplified on social media, through images shared by press, influencers, consumers and our own channels. Riccardo unveiled his debut collection Kingdom in London, celebrating Britishness in all its facets. Riccardo s vision is of a Burberry that is as much for the young as for the old. Street influences play just as important a role as codes of luxury and sophistication. There is an attitude and a spirit that is reverent but renegade. The response to Kingdom has been exceptional, including from wholesale partners. It was the second-most viewed show this season on Vogue.com and continues to be endorsed by some of the world s most followed influencers. In conjunction with the show, we initiated our new go-to-market model of frequent product drops. Launched initially through a new social selling mechanic on Instagram and WeChat, the B Series presented a limited-edition selection of Riccardo s first products for Burberry. This sold out rapidly in China, prompted much higher levels of engagement online and attracted double the mix of new and younger customers to the brand than the February capsule. The B Series product drops will now occur monthly and will also be available on Kakao in Korea and LINE in Japan. As previously announced we will also have an exciting collaboration with Vivienne Westwood available in December. The initiatives we activated to relaunch the brand generated significant brand heat, which is key in this phase of our plan. We also began to translate Riccardo s creative vision to our stores, starting in our home city, London, where we reimagined our flagship on Regent Street and refreshed our Bond Street store. We remodelled our windows across the full network. Most discussions to evolve our wholesale distribution are now complete and the required changes to our thirdparty distribution network are expected to accelerate in the second half of the year and into next year, as planned. This will complement the work we have already started in our directly operated store network, having closed a net 19 stores in the last 12 months. In terms of leather goods, we began to transition our handbags to our new creative vision and we completed an acquisition to create a leather goods centre of excellence in Italy, which will improve innovation, quality and sustainability. Modern luxury means being socially and environmentally responsible. In September, we announced that we would end the practice of destroying unsaleable products and will no longer use real fur. We were also recognised as the leading luxury brand in the Dow Jones Sustainability Index. While the early signs are encouraging, transitioning the product offer, evolving our distribution, changing wider consumer perception and seeing this translate into positive business performance will take time. Riccardo s full debut runway collection will be in stores in February and from May, all new deliveries will be Riccardo s product. 4

5 First half performance At this stage of the transition, we are navigating our business through the new branding and product we have launched, on the one hand, and the existing product and branding that remain in store, on the other. This is to be expected in the first year of a multi-year plan and the consistency of brand, positioning and availability of new product will build through the next financial year. We managed our channels dynamically and delivered revenue growth of 4% at CER excluding the impact of Beauty wholesale revenue. Group adjusted operating profit grew 8% at CER, benefiting from operating cost phasing and our focus on productivity, simplification and financial discipline. Our free cash flow was lower year-on-year, predominantly due to inventory, which reflected a combination of the transitionary phase and a seasonal outflow compared to the unusual inflow in the prior year. FY 2019 Outlook Whilst mindful of the transition the business is undertaking in the second half and the phased introduction of new product, we maintain our FY guidance of broadly stable revenue and adjusted operating margin at CER; and delivery of 100m cumulative cost savings. Revenue analysis Revenue by channel Period ended 29 Sept 30 Sept % change million Reported FX CER Retail * Retail comparable store sales 3% 4% Wholesale ex Beauty Licensing Revenue ex Beauty wholesale 1,220 1, Beauty wholesale - 77 n/a n/a 1,220 1,263 (3) (2) * Includes impact of retail calendar -0.6% and IFRS % Retail Retail sales +2% at CER; unchanged reported Negative impact of new space -1%, as guided First half comparable store sales +3% (Q1 and Q2 +3%). By region: Asia Pacific grew by a mid-single digit percentage Mainland China grew and Chinese spend shifted into Asian tourist destinations within the region particularly to Hong Kong and Korea EMEIA was broadly stable year-on-year The UK and Italy grew, with an improvement in the second quarter, while the Middle East remained weak due to macro factors 5

6 Americas grew by a mid-single digit percentage Performance in the US was consistent throughout the period with footfall up year-onyear. Elsewhere, while Canada grew, it was at a slower rate in the second quarter Good growth in digital Direct-to-consumer growth was led by Asia Pacific, whilst the Farfetch collaboration continued to perform ahead of our expectations By product We have seen a positive response to our newly launched handbags as we start to transform our leather offer Within apparel, our more complete wardrobe offer and full look merchandising drove continued strength in tops, trousers and skirts; and the elevated polo shirt offer introduced in the summer also contributed to this strong performance In outerwear, the Car Coat outperformed and our refreshed quilt programme also showed strength as customers continue to respond to innovation Store footprint We continued to evolve our store network to align with our luxury positioning. We have closed a net seven stores during the period bringing the total net store closures in the last 12 months to 19 (11 mainline, two concessions and six outlets) Store openings included the relocation and expansion of our Dubai flagship and openings in Shin Kong Place, Xian (China). Wholesale Excluding Beauty, wholesale revenue grew 10% at CER, ahead of expectations, due to strength from Asia travel retail accounts given regional travel patterns Significant growth in Asia Pacific and growth in EMEIA was offset by a decline in the US, as we take action to improve customer perception in the market Total wholesale revenue declined 18% at CER and reported FX reflecting the change in operation of the Beauty business, which transitioned to a licensed business model in October. Licensing Licensing revenue was up 13m year-on-year (+142% at CER), benefitting from Beauty transitioning from a wholesale to a licensed business model, while other royalties declined due to the non-renewal of the watches licence in December. Operating profit analysis Adjusted operating profit Period ended 29 Sept 30 Sept % change million Reported FX CER Retail/wholesale (11%) 1% Licensing % 160% Adjusted operating profit (4%) 8% Adjusted operating margin 14.6% 14.6% 6

7 Adjusted operating profit grew 8% with the following movements all at CER: Strong wholesale revenue growth Gross margin broadly stable benefiting from the Beauty transition to a licensed model The delivery of 15m of operating cost savings, bringing the cumulative total to 80m Operating cost phasing, particularly in marketing between halves and lower depreciation year-on-year reflecting capital expenditure phasing The group s operating margin increased by 150bps to 16.1% at CER. Including a 22m headwind from currency, adjusted operating profit was down 4% reported and adjusted operating margin was flat year-on-year at 14.6%. Adjusting operating items * Adjusting items were 5m (H1 : 58m), including restructuring costs of 10m and income of 6m associated with the disposal of our Beauty business. There is no change to the total estimated one-off costs associated with our cost and efficiency programme of c. 110m and our target of cumulative annualised cost savings of 120m in FY Reported operating profit was 173m (H1 : 127m) including the impact of these adjusting operating items. * For detail on adjusting items see Appendix and note 4 of Condensed Consolidated Interim Financial Statements Taxation The effective rate of tax on adjusted profit for FY 2019 is estimated to be about 24.0% (FY : 25.1%); this is the rate applied in the half (H1 : 25.0%). Tax on adjusting items has been recognised at the prevailing rates as appropriate. The resulting effective tax rate on H reported profit is 24.2% (H1 : 27.5%, FY : 28.8%). Cash flow Free cash flow generated in the half was 46m below the prior year level of 171m, predominantly due to inventory, which grew 11% year-on-year, excluding the impact of foreign exchange on translation of inventory balances. This growth reflects our ongoing product transition and a seasonal inventory outflow compared to the unusual inflow in the prior year. Other movements relating to cash flow were: A 37m outflow relating to receivables, predominantly due to our strong wholesale revenues in the period Capital expenditure of 51m (H1 : 53m) Tax paid of 40m (H1 : 50m) Net cash at 29 September was 647m, compared to 654m at and 892m at 31 March. There was a payment of 13m upon completion of the acquisition of a luxury leather goods business to create a leather goods centre of excellence in Italy. During the half 276m was returned to shareholders, with final dividends of 126m and share buyback of 150m (completing the share repurchase programme for FY 2019). Summary outlook Whilst mindful of the transition the business is undertaking in the second half of FY 2019 and the phased introduction of new product, we maintain our FY guidance of broadly stable revenue and adjusted operating margin at CER; and delivery of 100m cumulative cost savings. There is no change to our guidance of broadly stable revenue and adjusted operating margin at CER in FY 2020, for detailed outlook see Appendix. 7

8 APPENDIX Adjusting items* Period ended million 29 Sept 30 Sept Disposal of Beauty business 6 (28) Restructuring costs (10) (33) BME deferred consideration income/(charge) (1) 3 Adjusting operating items (5) (58) Adjusting financing (charge) (1) (2) Adjusting items (6) (60) *For additional detail on adjusting items see note 4 of Condensed Consolidated Interim Financial Statements Disposal of Beauty business The net income of 6m was predominantly due to positive resolution of some distributor negotiations associated with the transfer of Beauty operations to Coty in October. Restructuring costs Restructuring costs of 10m were incurred relating to our cost and efficiency programme, we continue to expect charges of 35m in FY There is no change to the total estimated one-off costs of the programme of c. 110m. Burberry Middle East (BME) deferred consideration The 1m charge principally reflects foreign exchange rate movements for the BME transaction. Adjusting finance charge The 1m charge relates to the discount unwind on the deferred consideration for the BME transaction. 8

9 Outlook * At constant exchange rates, there is no change to our guidance of broadly stable revenue and adjusted operating margin in FY 2019, including the impact of the Beauty transition. We currently expect: FY 2019 Retail: Net space reduction to impact retail revenue by -1%, as the programme of store rationalisation and relocation continues Wholesale (excluding Beauty): Revenue now expected to be up by a mid-single digit percentage due to anticipated growth from luxury accounts more than offsetting rationalisation activity (FY : 526m of which 73m Beauty) Licensing: Revenue up 15m including Beauty partly offset by the non-renewal of the watch licence Cumulative cost savings: 100m, an incremental 36m on FY Currency: At 31 October spot rates ~, the expected impact of year-on-year exchange rate movements on reported adjusted operating profit is c. 25m adverse, this is unchanged from the guidance given in July. The benefit to revenue is expected to be c. 10m Adjusting items: One-off restructuring costs of 35m, as previously guided Tax rate: A c.100bps reduction to about 24% as we move towards a range of 23%-24% by FY 2020 Capital expenditure: Now expected to be 150m- 160m, below original guidance of 160m- 170m, due to project phasing FY 2020 There is no change to the guidance of broadly stable revenue and adjusted operating margin. We remain mindful of the ongoing product transition that starts to build from February 2019 and the uncertain external environment, including the terms of the UK s withdrawal from the EU. Cumulative annualised cost savings: 120m *Guidance assumes constant exchange rates, a stable economic environment and current tax legislation unless otherwise stated. ~ see Exchange rates page 10 Retail calendar and IFRS 15 With effect from 1 April, Burberry is preparing its full year consolidated financial statements to a Saturday within seven days of the 31 March. In addition, Burberry has adopted the new accounting standard IFRS 15 relating to revenue from contracts with customers. For FY 2019, there will be no significant difference between the comparability of the prior year and current year income statement The impact on some of the individual quarters during FY 2019 is expected to be more pronounced than the full year impact. There will be some phasing impact on quarterly revenues resulting from a difference in trading days under the new and old financial reporting calendars To aid with comparability, in FY 2019, the impact of any revenue differences arising from the changes in reporting calendar and IFRS 15 have been separately identified. (see note 2 of the Condensed Consolidated Interim Financial Statements) 9

10 Exchange rates Forecast effective rates for FY 2019 Actual average exchange rates 31 October 29 June H H1 FY 1= Euro US Dollar Chinese Yuan Renminbi Hong Kong Dollar Korean Won 1,459 1,466 1,463 1,464 1,473 Retail/wholesale revenue by destination * Period ended 29 Sept 30 Sept % change million Reported FX CER Asia Pacific EMEIA Americas (2) 1 Total excluding Beauty wholesale 1,198 1, Beauty wholesale ,198 1,254 (5) (3) *For detail on retail/wholesale revenue by destination including Beauty wholesale see note 3 in the Condensed Consolidated Interim Financial Statements Retail/wholesale revenue by product division * Period ended 29 Sept 30 Sept % change million Reported FX CER Accessories Womens Mens Childrens & other # (2) (1) Total excluding Beauty wholesale 1,198 1, Beauty wholesale ,198 1,254 (5) (3) *For detail on retail/wholesale revenue by product division including Beauty wholesale see note 3 in the Condensed Consolidated Interim Financial Statements. # Including Beauty retail Store portfolio Directly-operated stores Stores Concessions Outlets Total Franchise stores At 31 March Additions Closures (10) (3) (3) (16) - At 29 September Store portfolio by region Directly-operated stores Stores Concessions Outlets Total Franchise At 29 September stores Asia Pacific EMEIA Americas Total

11 Profit before tax reconciliation Period ended 29 Sept 30 Sept % change million Reported FX CER Adjusted profit before tax (4) 8 Adjusting items* Disposal of Beauty operations 6 (28) Restructuring costs (10) (33) BME deferred consideration (1) 3 income/(charge) BME finance expense (1) (2) Profit before tax *For additional detail on adjusting items see note 4 of Condensed Consolidated Interim Financial Statements Alternative performance measures The following alternative performance measures are used to describe the Group s financial performance. These non-gaap measures are used for internal budgeting, performance monitoring, management remuneration and for external reporting purposes. The definition of adjusting items is contained in note 2 of the Condensed Consolidated Interim Financial Statements and details are shown on page 8. Constant exchange rates (CER) removes the effect of changes in exchange rates compared to the prior period. This takes into account both the impact of the movement in exchange rates on the translation of overseas subsidiaries results and also on foreign currency procurement and sales through the Group's UK supply chain. Comparable sales is the year-on-year change in sales from stores trading over equivalent time periods and measured at constant foreign exchange rates. It also includes online sales. Revenue excluding Beauty wholesale is presented to exclude Beauty wholesale revenue of 77m in H1 from total revenue to provide an understanding of the revenue of the business following the disposal of the Beauty business in October. Free cash flow is defined as net cash generated from operating activities, 97m (H1 : 224m), less capital expenditure net of cash inflows from disposal of fixed assets, 51m (H1 : 53m). Related parties Related party disclosures are given in note 16 of the Condensed Consolidated Interim Financial Statements. Principal Risks The principal risks and uncertainties that the Group faces for the remaining 26 weeks of the financial year remain for the most part similar to those previously reported and summarised below: Strategic and Financial Risks Execution of Strategy: Focused execution of the strategy through our six strategic pillars: Product, Communication, Distribution, Digital, Operational Excellence and Inspired People is key to sustainable shareholder value. Success depends on the value and relevance of our brand to global luxury consumers around the world and our ability to innovate. Failure to execute the projects that underpin these strategies successfully could result in under delivery of the expected growth, productivity and efficiency targets. This could have a significant impact on the value of the business and market confidence that we can deliver the strategy. 11

12 Volatility in foreign exchange rates: Burberry is exposed to uncertainty through foreign exchange movements which could have a significant impact on the Group s reported results. Operational Risks A cyber-attack results in a system outage, impacting core operations and/or results in a major data loss leading to reputational damage and financial loss. The Group s technology environment is critical to success. A robust control environment helps decrease the risks to core business operations and/or major data loss. People: Inability to attract, motivate, develop and retain our people to perform to the best of their ability in order to meet our strategic objectives. Delivery of our strategy relies on our ability to ensure our people continue to be driven and inspired to deliver outstanding results for the Company. Technology and IT Operations support critical processes across the company including retail, digital and Group functions such as Supply Chain and Finance. Failure to provide technology platforms that are stable and resilient and meet customer demands and support innovation can result in the failure to deliver the strategy and negatively impact operations due to poor system performance and/or system outages. Sustainability and Climate Change: The success of our business over the long term will depend on the social and environmental sustainability of our operations, the resilience of our supply chain and our ability to manage any potential climate change impacts. Business Interruption: A major incident at one of the Group s main locations, suppliers or affecting key products significantly interrupting the business. This could be caused by a wide range of events including natural catastrophe, fire, terrorism, or quality control failures. Compliance Risks Major compliance breach: The Group s operations are subject to a broad spectrum of national and regional laws and regulations in the various jurisdictions in which we operate. These include product safety, trademarks, competition, employee and customer health & safety, data, corporate governance, employment and tax. Changes to laws and regulations, or a major compliance breach could have a material impact on the business. Sustained breaches of Burberry s intellectual property (IP) rights or allegations of infringement by Burberry. Counterfeiting, copyright, trademark and design infringement in the marketplace can reduce the demand for genuine Burberry merchandise. External Risks Macro-Economic and Political instability: The group operates in a wide range of markets and is exposed to changing economic, regulatory, social and political developments that may impact consumer demand, disrupt operations and impact profitability. Adverse macro-economic conditions or country-specific changes to the operating or regulatory environment or civil unrest may impact spending habits of key consumer groups such as the Chinese consumer and cause increased operational costs. In the event of the UK withdrawing from the European Union without an agreement, there is likely to be a material but manageable operational and financial impact on Burberry s business. We continue to prepare mitigating actions to limit the operational and financial impact in the short to medium term. 12

13 Result of the External Audit Tender Burberry Group plc also announces today a proposal to appoint Ernst & Young LLP ( EY ) as its external auditor for the financial year ending 27 March The Audit Committee determined that the audit would be put out to tender by in accordance with the transitional guidance issued by the Financial Reporting Council. The proposed change of auditor follows a recommendation by the Audit Committee to the Board based on a formal tender in line with best practice. Further information on the tender process will be provided in the Audit Committee Report contained in the Company's Annual Report for the financial year ending 30 March A resolution to approve the appointment of EY will be put to shareholders at the Company's AGM in A resolution to re-appoint the Company's current auditor, PricewaterhouseCoopers LLP (PwC), for the financial year ending 28 March 2020 will be put to shareholders at the Company's AGM in PwC has been the auditor of the Burberry Group since 2002 and the Board would like to thank PwC for its continuing service to the Company. 13

14 CONDENSED GROUP INCOME STATEMENT UNAUDITED Note 26 weeks to 29 September Six months to Audited Year to 31 March Revenue 3 1, , ,732.8 Cost of sales (394.9) (389.4) (835.4) Gross profit ,897.4 Net operating expenses (652.6) (747.5) (1,487.1) Operating profit Financing Finance income Finance expense (1.7) (0.8) (3.5) Other financing charge (0.9) (1.0) (2.0) Net finance income Profit before taxation Taxation 5 (42.2) (35.3) (119.0) Profit for the period Attributable to: Owners of the Company Non-controlling interest Profit for the period Earnings per share basic p 21.5p 68.9p diluted p 21.4p 68.4p Reconciliation of adjusted profit before taxation: Profit before taxation Adjusting items: adjusting operating items adjusting financing items Adjusted profit before taxation - non-gaap measure Adjusted earnings per share - non-gaap measure basic p 32.6p 82.8p diluted p 32.3p 82.1p Dividends per share Proposed interim (not recognised as a liability at period end) p 11.0p 11.0p Final (not recognised as a liability at year end) p 14

15 CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME UNAUDITED 26 weeks to 29 September Six months to Audited Year to 31 March Profit for the period Other comprehensive income 1 : Cash flow hedges (0.1) (4.3) (10.0) Net investment hedges Foreign currency translation differences 14.7 (40.4) (50.2) Tax on other comprehensive income: Cash flow hedges Net investment hedges (0.4) (0.7) (0.4) Foreign currency translation differences (1.1) Other comprehensive income for the period, net of tax 15.3 (38.5) (52.8) Total comprehensive income for the period Total comprehensive income attributable to: Owners of the Company Non-controlling interest 0.2 (0.2) (0.4) All items included in other comprehensive income may subsequently be reclassified to profit and loss in a future period. 15

16 CONDENSED GROUP BALANCE SHEET UNAUDITED Note 29 September Audited 31 March ASSETS Non-current assets Intangible assets Property, plant and equipment Investment properties Deferred tax assets Trade and other receivables Derivative financial assets Current assets Inventories Trade and other receivables Derivative financial assets Income tax receivables Cash and cash equivalents , , ,541.7 Assets classified as held for sale 35.7 Total assets 2, , ,223.0 LIABILITIES Non-current liabilities Trade and other payables 12 (173.4) (100.3) (168.1) Deferred tax liabilities (1.6) (0.5) (4.2) Derivative financial liabilities (0.1) (0.1) (0.1) Retirement benefit obligations (0.9) (0.9) (0.9) Provisions for other liabilities and charges 13 (64.6) (61.1) (71.4) (240.6) (162.9) (244.7) Current liabilities Bank overdrafts 14 (17.9) (22.9) (23.2) Derivative financial liabilities (5.1) (2.7) (3.8) Trade and other payables 12 (487.6) (477.8) (460.9) Provisions for other liabilities and charges 13 (32.8) (30.9) (32.1) Income tax liabilities (45.9) (33.6) (32.9) Total liabilities (589.3) (567.9) (552.9) (829.9) (730.8) (797.6) Net assets 1, , ,425.4 EQUITY Capital and reserves attributable to owners of the Company Ordinary share capital Share premium account Capital reserve Hedging reserve Foreign currency translation reserve Retained earnings Equity attributable to owners of the Company 1, , ,420.5 Non-controlling interests in equity Total equity 1, , ,

17 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY UNAUDITED Note Attributable to the owners of the Company Ordinary share capital Share premium account Other reserves Retained earnings Total Noncontrolling interest Balance as at 1 April , , ,697.8 Profit for the period Other comprehensive income: Cash flow hedges gains deferred in equity Cash flow hedges gains transferred to income (4.5) (4.5) (4.5) Net investment hedge gains deferred in equity Foreign currency translation differences (40.1) (40.1) (0.3) (40.4) Tax on other comprehensive income Total comprehensive income for the period (38.2) (0.2) 54.5 Transactions with owners: Employee share incentive schemes value of share options granted value of share options transferred to liabilities (0.9) (0.9) (0.9) tax on share options granted exercise of share options Purchase of own shares share buy-back (201.0) (201.0) (201.0) Dividend paid in the period (123.0) (123.0) (123.0) Total equity Balance as at , ,438.0 Balance as at 1 April , ,425.4 Adjustment on initial application of IFRS 9 (0.2) (0.2) (0.2) Adjusted balance as at 1 April , ,425.2 Profit for the period Other comprehensive income: Cash flow hedges gains deferred in equity Cash flow hedges gains transferred to income (1.4) (1.4) (1.4) Net investment hedge gains deferred in equity Foreign currency translation differences Tax on other comprehensive income (1.5) (1.5) (1.5) Total comprehensive income for the period Transactions with owners: Employee share incentive schemes value of share options granted value of share options transferred to liabilities (0.1) (0.1) (0.1) tax on share options granted exercise of share options Purchase of own shares share buy-back (150.7) (150.7) (150.7) Dividend paid in the period (126.0) (126.0) (126.0) Balance as at 29 September , ,

18 CONDENSED GROUP STATEMENT OF CASH FLOWS UNAUDITED Note 26 weeks to 29 September Six months to Audited Year to 31 March Cash flows from operating activities Operating profit Depreciation Amortisation Net impairment of intangible assets Net impairment (reversal)/charge of property, plant and equipment 9 (1.2) Loss on disposal of property, plant and equipment and intangible assets Write-down of assets held for sale 10.9 Gain on disposal of Beauty operations (5.9) (5.2) Gain on derivative instruments (4.5) (3.5) Charge in respect of employee share incentive schemes Receipt from settlement of equity swap contracts (Increase)/decrease in inventories (82.7) (Increase)/decrease in receivables (36.9) Increase in payables and provisions Cash generated from operating activities Interest received Interest paid (1.0) (0.7) (1.6) Taxation paid (40.4) (49.5) (118.4) Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment (27.2) (34.4) (57.5) Purchase of intangible assets (24.0) (18.3) (48.5) Proceeds from disposal of Beauty operations, net of cash costs paid Acquisition of subsidiary 19 (12.5) Net cash outflow from investing activities (62.5) (52.7) (44.9) Cash flows from financing activities Dividends paid in the year (126.0) (123.0) (169.4) Payment to non-controlling interest 12 (2.9) (3.0) Issue of ordinary share capital Purchase of shares through share buy-back (150.7) (190.7) (355.0) Purchase of own shares by ESOP trusts (11.9) Net cash outflow from financing activities (278.7) (312.2) (536.1) Net (decrease)/increase in cash and cash equivalents (244.2) (141.3) 97.4 Effect of exchange rate changes (0.8) (13.6) (14.5) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Note 29 September Audited 31 March Cash and cash equivalents as per the Balance Sheet Bank overdrafts 14 (17.9) (22.9) (23.2) Net cash

19 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Burberry Group plc and its subsidiaries (the Group) is a global luxury goods manufacturer, retailer and wholesaler. The Group also licenses third parties to manufacture and distribute products using the Burberry trade marks. All of the companies which comprise the Group are controlled by Burberry Group plc (the Company) directly or indirectly. The financial information contained in this report is unaudited. The Condensed Group Income Statement, Condensed Group Statement of Comprehensive Income, Condensed Group Statement of Changes in Equity and Condensed Group Statement of Cash Flows for the 26 weeks to 29 September, and the Condensed Group Balance Sheet as at 29 September and related notes have been reviewed by the auditors and their report to the Company is set out on page 36. These condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act Statutory accounts for the year ended 31 March were approved by the Board of Directors on 15 May and have been filed with the Registrar of Companies. The report of the auditors on the statutory accounts for the year ended 31 March was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498 of the Companies Act These condensed consolidated interim financial statements for the 26 weeks to 29 September have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union. This report should be read in conjunction with the Group s financial statements for the year ended 31 March, which have been prepared in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the European Union. The directors have made enquiries and reviewed the Group s updated forecasts and projections. These include the assumptions around the Group s products and markets, expenditure commitments, expected cashflows and borrowing facilities. Taking into account reasonable possible changes in trading performance, and after making enquiries, the directors consider it appropriate to continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements for the 26 weeks to 29 September. Accounting policies and presentation are consistent with those applied in the Group s financial statements for the year ended 31 March, as set out on pages 144 to 150 of those financial statements, with the exception of the following: Taxation Taxes on income in the interim periods are accrued using the expected tax rate that would be applicable to total annual earnings. Accounting reference date On 1 April, a new policy was adopted for the accounting reference date, in line with guidance under the Companies Act 2006 Section 390. Previously, the accounting reference date was 31 March each year. From 1 April onwards, the accounting reference date will be a Saturday within 7 days of 31 March. For the current year, the accounting reference date is 30 March 2019 for the full year and 29 September for the half year. Comparative information for the period ended 30 September and year ended 31 March has not been restated. Had the new policy not been adopted, the impact on the results for the current period would be to increase revenue by 7.9m and increase operating profit by 2.0m. 19

20 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Revenue The Group adopted IFRS 15 Revenue from Contracts with Customers, for the period commencing 1 April. This standard addresses the way that revenue derived from contracts with customers is recognised in the financial statements. It replaces IAS 18 Revenue and IAS 11 Construction Contracts. The Group has adopted IFRS 15 using the modified retrospective approach. The impact of adoption is not material and as such no adjustment has been recognised in opening reserves at 1 April. The principal impacts of adopting IFRS 15 on the Group s financial statements are as follows: Revenue derived from digital retail sales is recognised when the goods are delivered to the customer. Under IAS 18, revenue was previously recognised when the goods were dispatched to the customer. The impact of this change on the current year results is a reduction in revenue of 1.2m for the 26 weeks to 29 September and a corresponding increase in contract liabilities of 1.2m as at 29 September. Payments made to customers for services they provide, directly relating to sales to that customer, are recognised as a reduction in revenue, unless in exchange for a distinct good or service. These payments were previously recognised as operating expenses under IAS 18. The impact on the income statement, for the 26 weeks to 29 September, is to reclassify charges of 0.7m from operating expenses to revenue. Amounts received from customers relating to performance obligations not yet completed are classified as contract liabilities. These amounts were previously classified as deferred income under IAS 18. Contract liabilities are disclosed in note 12 for the current reporting period. The primary statements are not impacted by this change in classification. The Group s new accounting policy for revenue is set out below. The previous policy for revenue is set out in note 2a) of the Group s financial statements for the year ended 31 March. Accounting policy for revenue The Group obtains revenue from contracts with customers relating to sales of luxury goods to retail and wholesale customers. The Group also obtains revenue through licences issued to third parties to produce and sell goods carrying Burberry trademarks. Retail and wholesale revenue For retail and wholesale revenue, the primary performance obligation is the transfer of luxury goods to the customer. For retail revenue this is considered to occur when control of the goods passes to the customer. For in store retail revenue, control transfers when the customer takes possession of the goods in store and pays for the goods. For digital retail revenue, control is considered to transfer when the goods are delivered to the customer. The timing of transfer of control of the goods in wholesale transactions depends upon the terms of trade in the contract. Principally for wholesale revenue, revenue is recognised either when goods are collected by the customer from the Group s premises, or when the Group has delivered the goods to the location specified in the contract. Provision for returns and other allowances are reflected in revenue when revenue from the customer is first recognised. Returns are initially estimated based on historical levels and adjusted subsequently as returns are incurred. Some wholesale contracts may require the Group to make payments to the wholesale customer, for services directly relating to the sale of the Group s goods, such as the cost of staff handling the Group s goods at the wholesaler. Payments to the customer directly relating to the sale of goods to the customer are recognised as a reduction in revenue, unless in exchange for a distinct good or service. These charges are recognised in revenue at the later of when the services provided to the customer are performed or when the customer is paid for the service. Payments to the customer relating to a service which is distinct from the sale of goods to the customer are recognised in operating costs. The Group sells gift cards and similar products to customers, which can be redeemed for goods, up to the value of the card, at a future date. Revenue relating to gift cards is recognised when the card is redeemed, up to the value of th e redemption. Unredeemed amounts on gift cards are classified as contract liabilities. Typically, the Group does not expect to have significant unredeemed amounts arising on its gift cards. Licensing revenue The Group s licences entitle the licensee to access the Group s trademarks over the term of access to the licence. Hence revenue from licensing is recognised over the term of the licence. Royalties payable under licence agreements are usually based on production or sales volumes and are accrued in revenue as the subsequent production or sale occurs. Any amounts received which have not been recognised in revenue are classified as contract liabilities. 20

21 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Financial Instruments The Group adopted IFRS 9 Financial Instruments, for the period commencing 1 April, with the exception of the hedge accounting element which will be adopted when the IFRS 9 Macro hedging is endorsed by the European Union. Until this time the Group will continue to hedge account under IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 replaces the guidance in IAS 39 Financial instruments: Recognition and measurement. The standard simplifies the mixed measurement model contained in IAS 39 and establishes three primary measurement categories for financial assets: amortised cost; fair value through Other Comprehensive Income (OCI); and fair value through profit and loss. The classification of financial assets is based on the business model in which the asset is managed and its contracted cash flow characteristics. The application of the new standard has resulted in a change in classification of some financial instruments to reflect the new measurement categories. The most significant impact for the Group is that cash equivalents held in money market funds will be classified as fair value through profit and loss whereas they were previously measured at amortised cost. However, as the Group only invests in low volatility funds at present, this change in measurement basis has not had any impact on the book value of cash equivalents. The impact of this change relating to cash and cash equivalents is set out in note 11. There are no other classification impacts other than the description applied to financial instruments. The Group s classification and measurement of financial instruments under IFRS 9 and IAS 39 is set out in the table on page 22. IFRS 9 introduces a forward-looking impairment model based on expected credit losses on financial assets. This has had a minor effect on the measurement of the Group s bad debt provisions, as credit losses are recognised earlier than under IAS 39. There are also revised disclosure requirements for financial instruments. Comparative information has not been restated. The Group has adopted IFRS 9 with the exception of the hedge accounting element which remains in accordance with IAS 39. The determination of the business model within which a financial asset is held has been made on the basis of the facts and circumstances that existed on 1 April. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings as at 1 April. The impact, net of tax, of the transition to IFRS 9 on financial assets and retained earnings as at 1 April was to decrease retained earnings by 0.2m, decrease current trade and other receivables by 0.3m and to decrease current tax liabilities by 0.1m. This IFRS 9 adoption adjustment relates to the different approach to measuring impairment of receivables under IFRS 9 compared to IAS 39. Refer to the Condensed Group Statement of Changes in Equity on page