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Interim results FOR THE six months ENDED
30 September 2012
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FIRST HALF REVIEW
—
Directly operating fragrance and beauty
—
QUESTIONS
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FIRST HALF ACHIEVEMENTS
• FIRST HALF PERFORMANCE– Revenue grew 6% to £883m– Adjusted PBT grew 7% to £173m– Retail/wholesale
• Revenue grew 7%• Adjusted operating profit grew 11%
– £237m cash – Interim dividend up 14% to 8.0p
• CONSISTENT EXECUTION OF KEY STRATEGIES– Investment plans unchanged
• Flagship and emerging markets• High potential product categories
– Correcting legacy issues in all channels and certain products
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BRAND MOMENTUM STRONG
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REVENUE GREW 6%
£830m£883m
(£9m)£52m £12m (£2m)
H1 2011 EXCHANGERATES
RETAIL WHOLESALE LICENSING H1 2012
REVENUE
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REVENUE GREW 6%
• REVENUE GREW 8% UNDERLYING
• RETAIL– 65% of revenue– 10% underlying growth
• WHOLESALE– 29% of revenue– 5% underlying growth
• LICENSING– 6% of revenue– 5% underlying decline, as expected
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RETAIL REVENUE GREW 10%*
£528m
£577m
(£3m)£36m
£16m
H1 2011 EXCHANGERATES
NEWSPACE
COMPSTORE
GROWTH
H1 2012
REVENUE
* UNDERLYING
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RETAIL REVENUE GREW 10%
• COMPARABLE STORE SALES GREW 3%– Q1 grew 6%– Q2 grew 1%– Footfall decelerated
• HIGHER QUALITY SALES GROWTH– Increased average transaction values– Modest price increases– Mix improved
• Prorsum and London penetration up five percentage points• Brit now 55% of mainline apparel; more footfall-driven
• 12% AVERAGE RETAIL SPACE GROWTH IN H1– Focused on flagship markets including Hong Kong, Milan, Rome and London– Opened net six stores and seven concessions
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INVESTING IN FLAGSHIP MARKETS
REGENT STREET, LONDON
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INVESTING IN FLAGSHIP MARKETS
• FULL YEAR CAPITAL EXPENDITURE UNCHANGED AT £180-200M– Re-tested projects against 25% IRR hurdle– Half of spend in flagship markets– About 14% average retail space growth
planned in H2
KNIGHTSBRIDGE, LONDON
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£248m £253m(£7m) £12m
H1 2011 EXCHANGERATES
GROWTH H1 2012
REVENUE
WHOLESALE REVENUE grew 5%*
* UNDERLYING
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• H1 IN LINE WITH GUIDANCE
• OUTLOOK FOR H2 – More cautious approach from customers globally– Broadly unchanged revenue year-on-year at constant FX
• FOCUS ON QUALITY OF SALES– Continuing correction of legacy distribution and products– Growth led by US department stores, Asia Travel Retail and emerging markets
WHOLESALE REVENUE grew 5%
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REVENUE
£54m £53m£1m (£3m) £1m
H1 2011 EXCHANGERATES
NON -RENEWALS
GROWTH H1 2012
LICENSING REVENUE DOWN 5%*
* UNDERLYING
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• DOWN 3% AT REPORTED FX– Consistent with full year guidance
• CORRECTING LEGACY ISSUES IN JAPAN COST £3M
• PREPARING FOR JAPAN APPAREL TRANSITION TO GLOBAL COLLECTION
• GLOBAL PRODUCT LICENCES– Solid growth across categories– Launch of The Britain watch
• OUTLOOK FOR FY 2013– Broadly unchanged revenue year-on-year at constant and reported FX
LICENSING REVENUE DOWN 5%
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THE BRITAIN WATCH
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BALANCED BY REGION
ASIA PACIFIC: 36% 11% GROWTHAMERICAS: 24%
5% GROWTH
EUROPE: 33%8% GROWTH
REST OF WORLD: 7%14% GROWTH
% growth on underlying basisH1 2012 RETAIL/WHOLESALE REVENUE
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BALANCED BY REGION
• ASIA PACIFIC GREW 11%– Hong Kong robust, if uneven; Pacific Place and Russell Street openings– Korea and Taiwan weak; Singapore and Japan good– China 12% of group retail/wholesale revenue
• Slowdown footfall-driven• More purchases at higher transaction values• Continue to invest in this high potential market
• EUROPE GREW 8%– France and Germany robust; Italy weak– UK impacted by Olympic disruption
• AMERICAS GREW 5%– Wholesale outperformed retail– Retail more dependent on domestic consumer– H2 openings in Brazil, Mexico and Chicago
• REST OF WORLD GREW 14%– Retail still variable– Double-digit growth in wholesale
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ASIA PACIFIC GREW 11%
PACIFIC PLACE, HONG KONG
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CHINA GREW mid-teens %
• CONTINUE TO INVEST IN THIS HIGH POTENTIAL MARKET– Increasing wealth– Fast growing domestic luxury demand– Outbound travel increasing
SINA WEIBO
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EUROPE GREW 8%
VIA MONTENAPOLEONE, MILAN OLYMPICS 2012 CLOSING CEREMONY
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AMERICAS GREW 5%
MICHIGAN AVENUE, CHICAGO
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BALANCED BY PRODUCT DIVISION
WOMENS: 32% 6% GROWTH
MENS: 25%12% GROWTH
ACCESSORIES: 39%8% GROWTH
CHILDRENS: 4%5% GROWTH
% growth on underlying basisH1 2012 RETAIL/WHOLESALE REVENUE
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BALANCED BY PRODUCT DIVISION
• BALANCED ASSORTMENT BY LABEL, CATEGORY AND PRICE POINT– Constant evolution
• SOLID CORE OF LARGE LEATHER GOODS, OUTERWEAR AND REPLENISHMENT
• GROWTH INITIATIVES SUCCESSFUL– Mens tailoring– Mens accessories– Soft accessories
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INTENSE FOCUS ON FESTIVE
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STACEY CARTWRIGHT—
EVP, CHIEF FINANCIAL OFFICER
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FINANCIAL HIGHLIGHTS
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M GROWTH
REVENUE 883 830 6%
ADJUSTED PBT 173.4 161.6 7%
ADJUSTED DILUTED EPS 29.0p 26.9p 8%
NET CASH 237 174 36%
DIVIDEND PER SHARE 8.0p 7.0p 14%
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ADJUSTED OPERATING PROFIT GREW 7%
£162.1m£173.6m
£2.3m
£12.0m (£2.8m)
H1 2011 EXCHANGERATES
RETAIL/WHOLESALE
LICENSING H1 2012
ADJUSTED OPERATING PROFIT
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RETAIL/WHOLESALE PROFIT GREW 11%
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M CHANGE
RETAIL/WHOLESALE REVENUE 829.9 775.3 7%
GROSS MARGIN 574.4 517.6
AS % OF REVENUE 69.2% 66.7% 250bp
OPERATING EXPENSES (445.5) (401.9)
AS % OF REVENUE (53.7%) (51.8%) (190bp)
ADJUSTED OPERATING PROFIT 128.9 115.7 11%
AS % OF REVENUE 15.5% 14.9% 60bp
GOAL REMAINS TO MANAGE GROSS MARGIN AND OPERATING EXPENSES DYNAMICALLY TO DELIVER MODEST OPERATING MARGIN IMPROVEMENT IN FY 2013
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H1 2008 H1 2009 H1 2010 H1 2011 H1 2012
RETAIL/WHOLESALE GROSS MARGIN GREW 250BP
69.2%
56.8% 57.6%
64.3%66.7%
GROSS MARGIN
45% 57% 64%56%RETAIL AS % OF GROUP SALES 65%
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RETAIL/WHOLESALE GROSS MARGIN GREW 250BP
• GROSS MARGIN AT 69.2%
• DRIVEN BY– Modest price increases– FX benefits, especially euro – Continued shift to retail
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RETAIL/WHOLESALEOPERATING EXPENSES/REVENUE AT 53.7%
ADJUSTED OPERATING EXPENSES/REVENUE
H1 2008 H1 2009 H1 2010 H1 2011 H1 2012
45% 57% 64%56%RETAIL AS % OF GROUP SALES 65%
53.7%
43.9%46.9%
49.5% 51.8%
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RETAIL/WHOLESALEOPERATING EXPENSES/REVENUE AT 53.7%
• OPERATING EXPENSES UP 11% OR £44M
• DRIVEN BY– £15m reduction in performance-related payments– New retail space– General inflation– Investment in front and back of house– Tight control of discretionary spend
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H1 2012 INCLUDES FX BENEFIT OF £1.1M IN REVENUE AND NIL IN OPEX
LICENSING PROFIT
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M
REVENUE 52.6 54.3
GROSS MARGIN AT 100% 52.6 54.3
OPERATING EXPENSES (7.9) (7.9)
OPERATING PROFIT 44.7 46.4
OPERATING MARGIN 85.0% 85.5%
YEN HEDGE RATE 125 135
3636
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INCOME STATEMENT
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M
ADJUSTED OPERATING PROFIT 173.6 162.1
NET FINANCE CHARGE (0.2) (0.5)
ADJUSTED PROFIT BEFORE TAX 173.4 161.6
EXCEPTIONAL ITEMS (61.5) (2.9)
PROFIT BEFORE TAX 111.9 158.7
TAX (26.5) (42.8)
DISCONTINUED OPERATIONS 0.1 0.6
NON-CONTROLLING INTEREST (0.5) 0.7
ATTRIBUTABLE PROFIT 85.0 117.2
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INCOME STATEMENT
• NET FINANCE CHARGE OF £0.2M– Facility fees offset income on cash balance
• EXCEPTIONAL ITEMS OF £61.5M– £73.8m termination of fragrance and beauty licence relationship charge– £11.7m China put option liability finance credit– £0.6m restructuring credit
• EFFECTIVE TAX RATE OF 25% ON ADJUSTED PBT
• NON-CONTROLLING INTEREST OF £0.5M– Reflects profit in China and Middle East partially offset by losses in Japan and India
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CASH INFLOW FROM OPERATIONS
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M
ADJUSTED OPERATING PROFIT 173.6 162.1
DISCONTINUED OPERATIONS 0.1 0.6
RESTRUCTURING SPEND (0.6) (6.2)
DEPRECIATION AND AMORTISATION 48.6 39.5
EMPLOYEE SHARE SCHEME COSTS 10.2 16.0
INCREASE IN INVENTORIES (42.3) (90.3)
INCREASE IN RECEIVABLES (48.1) (43.9)
(DECREASE)/INCREASE IN PAYABLES (5.8) 27.2
OTHER NON-CASH ITEMS 2.6 0.3
CASH INFLOW FROM OPERATIONS 138.3 105.3
4040
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MOVEMENT IN NET CASH
£338m (£79m)
£237m
£138m (£89m)
(£47m)
(£28m)£4m
MAR 2012 OPERATINGCASHFLOW
INVESTMENT TAX DIVIDENDS ESOP TRUSTPURCHASES
OTHER SEP 2012
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TOTAL CASH FLOW
SIX MONTHS TO 30 SEPTEMBER 2012£M
2011£M
CASH INFLOW FROM OPERATIONS 138.3 105.3
CAPITAL EXPENDITURE (88.8) (63.0)
CAPITAL CONTRIBUTIONS FROM JV PARTNERS 0.4 4.9
ACQUISITIONS (1.0) (11.0)
NET INTEREST 0.6 (0.5)
TAX PAID (46.8) (48.7)
FREE CASH FLOW 2.7 (13.0)
DIVIDENDS (78.6) (68.4)
ESOP TRUST PURCHASES/OTHER (27.3) (41.8)
EXCHANGE DIFFERENCE 2.1 (0.5)
TOTAL CASH FLOW (101.1) (123.7)
NET CASH AT 31 MARCH 338.3 297.9
NET CASH AT 30 SEPTEMBER 237.2 174.2
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Strong financial position—
Goal is to deliver further modest improvement in FULL YEAR retail/wholesale margin
—
Balancing EXPENSE control AND investment
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FY 2013 OUTLOOK
FY 2013 Modest retail/wholesale adjusted operating margin improvement
RETAIL About 14% increase in average retail selling space in H2
WHOLESALE Broadly unchanged underlying revenue in H2
LICENSING Broadly unchanged revenue year-on-year in FY 2013- At constant and reported FX
INTEREST Broadly nil
DEPRECIATION Around £110m in FY 2013
UNDERLYING TAX RATE 25% for FY 2013
DIVIDEND POLICY Approximate 40% full year payout based on adjusted diluted EPS
CAPITAL EXPENDITURE £180-200m in FY 2013
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Directly operating FRAGRANCE AND BEAUTY
• STRATEGIC RATIONALE– Greater brand control– Significant opportunities
• ENDED LICENCE RELATIONSHIP FROM 31 DECEMBER 2012– Original expiry date 31 December 2017– Payment of €181m to Interparfums on 31
December 2012– Three month extension of licence relationship to
31 March 2013– Directly operating from 1 April 2013
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FRAGRANCE AND BEAUTYaccounting impact
• ACCOUNTING RULES REQUIRE €181M (£142M) PAYMENT TO BE EXPENSED BY 31 DECEMBER 2017
• £71M CAPITALISED AS AN INTANGIBLE ASSET IN H1– Annual amortisation charge of £15m
• Non-cash• Reported in exceptional items
– Purchase of intangible asset excluded from full year capital expenditure guidance of £180-200m
• £74M RECOGNISED AS EXPENSE IN H1– Includes £2.5m of related costs– Reported in exceptional items
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Fragrance and beautyestimated financial impact
FY 2013£M
FY 2014£M
WHOLESALE REVENUE - 140
RETAIL/WHOLESALE OPERATING PROFIT - 25
LICENSING REVENUE/PROFIT - (25)
ADJUSTED PBT* - -
EXCEPTIONAL ITEMS
H1 TERMINATION CHARGE (74) -
H2 SET-UP COSTS (5-10) -
ANNUAL AMORTISATION CHARGE - (15)
* INTEREST INCOME REDUCED BY C.£1M IN FULL YEAR
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FRAGRANCE AND BEAUTYESTIMATED FINANCIAL IMPACT
• FY 2013– No impact on retail/wholesale revenue and operating profit– No change to licensing guidance– Minimal impact on adjusted PBT
• Financing costs only for Q4– H2 exceptional charge for set-up costs of £5-10m
• FY 2014 – A TRANSITION YEAR– Wholesale revenue expected to be about £140m, H2 weighted– Incremental retail/wholesale operating profit of around £25m, H2 weighted– Reduction of licensing revenue/profit of about £25m– Broadly neutral to adjusted PBT
• c.£1m financing cost
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Angela ahrendts—
Chief executive officer
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LEVERAGE THE FRANCHISE—
INTENSIFY NON-APPAREL —
ACCELERATE RETAIL-LED GROWTH—
INVEST IN UNDER-PENETRATED MARKETS
—PURSUE OPERATIONAL EXCELLENCE
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Directly operatingFRAGRANCE AND BEAUTY
• TIMING IS RIGHT– One-off opportunity before 2018– Burberry brand has evolved
• UNDER-PENETRATED IN FRAGRANCE AND BEAUTY
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BENEFITS OF BRAND INTEGRATION
• MOST WIDELY ENCOUNTERED PROJECTION OF BRAND– Opening price point– Brand media spend
• INTEGRATED MARKETING– Cohesive media campaign– Scale advantages in placement and cost
• SYNERGISTIC RELATIONSHIP WITH FASHION
• ALIGN DISTRIBUTION
• IN LINE WITH STRATEGY– Core activity/ownership mindset
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INNOVATIVE LAUNCH OF BURBERRY BODY
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ESTABLISHED CATEGORY WITH STABLE GROWTH
€57bn€55bn
€47bn
€42bn
ACCESSORIES APPAREL HARD LUXURY PERFUME AND COSMETICS
+14% +10% +13% +5%GROWTH RATES 2011-12E
SOURCE: BAIN/ALTAGAMMA
2012E REVENUE
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UNDER-PENETRATED IN FRAGRANCE
RTW AND ACCESSORIES
SOURCE: BURBERRY ESTIMATES
FRAGRANCE AND BEAUTY
BRAND C
BRAND A
BRAND D
BRAND B
BURBERRY
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Nascent business IN BEAUTY
CHANEL DIOR YSL ARMANI BURBERRY
SOURCE: BURBERRY ESTIMATES
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Matt mcevoy—
Svp, strategy AND new business development
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PRODUCT portfolio
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BUILDING THE BODY pillar
MARCH 2012
EAU DE TOILETTE
EAU DE PARFUM
SEPT 2011 SEPT 2012
ROSE GOLD BODY TENDER
2013
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ALIGNING THE PYRAMID
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BEAUTY product strategy
• TEST ESTABLISHED BASE– Launched two years ago– Currently in 90 doors
• INCREASE PACE OF SEASONAL PRODUCT INTRODUCTIONS– Similar to fashion flow– While continuing to build the base
• INTENSIFY MARKETING EFFORT
• EXPAND NUMBER OF DOORS
6262
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HISTORICAL MODEL
PRODUCT DEVELOPMENTMANUFACTURING
DISTRIBUTOR NETWORK
INVENTORY MANAGEMENT
SALES & DISTRIBUTOR MANAGEMENT
SOURCING
MARKETING AND PR
LOGISTICS
DESIGN
CREATIVE
BURBERRY THIRD PARTIESINTERPARFUMS
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RUNNING THE BEAUTY DIVISION
PRODUCT DEVELOPMENT
INVENTORY MANAGEMENT
SALES & DISTRIBUTOR MANAGEMENT
SOURCING
MARKETING AND PR
DESIGN
CREATIVE
BURBERRY
MANUFACTURING
DISTRIBUTOR NETWORK
LOGISTICS
THIRD PARTIES
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Transition arrangements
• SIGNIFICANT BUSINESS INTEGRATION EXPERIENCE
• TRANSITION PLAN WITH INTERPARFUMS– Three month extension– Progressive transfer of processes and projects
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Integration work underway
• DIALOGUE WITH DISTRIBUTORS
• SOURCING/LOGISTICS TEAMS SECURING PRODUCT FLOW
• IT INTEGRATION IN PROGRESS
• HR SUPPLEMENT EXISTING CAPABILITIES
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BURBERRY BEAUTY THE FIFTH PRODUCT DIVISION
• LEVERAGING OUR EXISTING INFRASTRUCTURE AND PEOPLE– Functional experience already exists in key areas– Reallocating internal resource
• ATTRACTING NEW TALENT FROM RELEVANT INDUSTRIES
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Burberry’s fifthProduct division
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FURTHER FINANCIAL GROWTH—
‘PAY AS YOU GO’ IN ACTION—
EXECUTE KEY STRATEGIES—
INVEST FOR GROWTH
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APPENDIX
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DISCLAIMER
Certain statements made in this presentation 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.
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 presentation 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, the Equestrian Knight Device and the Burberry Check are trademarks belonging to Burberry which are registered and enforced worldwide.
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ADJUSTED MEASURES
All metrics and commentary in the this presentation exclude the results of the discontinued business in Spain and exceptional items, unless stated otherwise.
Exceptional items are: A charge of £73.8m relating to the termination of the fragrance and beauty licence relationship (2011:
nil). A restructuring credit of £0.6m (2011: nil). A put option liability finance credit of £11.7m relating to the third party 15% economic interest in the
Chinese business (2011: charge of £2.9m).
Underlying change is calculated at constant exchange rates.
Certain financial data within this announcement have been rounded.
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IR CONTACTS
Kim Warren
Investor Relations Associate
Fay Dodds
Director of Investor Relations
Charlotte Cowley
Investor Relations Manager
Horseferry House
Horseferry Road
London
SW1P 2AW
Tel: +44 (0)20 3367 3524
www.burberryplc.com
www.burberry.com
www.artofthetrench.com
www.facebook.com/burberry
www.twitter.com/burberry
www.youtube.com/burberry
https://plus.google.com/+Burberry
Adam Wright
Investor Relations & New Business Development Manager
