RNS Number:7926J
Mulberry Group PLC
13 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 to
announce continued strong sales and the further development of its global
expansion 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 global
luxury brand. Our programme of reinvesting in the business is already benefiting
the Company and consumer awareness in Asia and the USA is growing. The Group
continues to make steady progress while the foundations for international growth
in the medium term are laid."
-ENDS-
Enquiries
WMC Communications
David Wynne-Morgan 020 3178 4416
Gavin 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 luxury
brand. We continue to invest in building our presence not only in the UK and
Europe but also in new markets such as the USA, Asia and the Middle East. This
strategy 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, especially
in the USA and Asia, we have increased our expenditure substantially on
advertising and marketing. As I explained in my last Chairman's Statement, this
investment is an important part of the strategy to turn Mulberry into a global
luxury brand. As anticipated, this expenditure reduced our operating profits for
the period under review, which were �1.1 million (2006: �2.5 million). Basic
earnings per share reduced to 1.4 pence (2006: 3.0 pence) due to the reduction
in operating profits and the conversion of the preference shares in April 2007.
The increased proportion of Group sales through Mulberry owned shops and
concessions resulted in a further improvement in our gross profit margins which
increased to 57.4% (2006: 56.5%).
Overall administrative expenses increased by �2.1 million in the six months
under review compared to the prior year. This includes the operating costs of
the new shops and concessions opened in the previous twelve months of �1.6
million combined with increased marketing and advertising expenditure of �0.8
million which has been balanced by general savings in administrative and
occupancy costs as the process of simplifying operations has continued.
The Group's cash position continues to be strong with cash generated by
operations before tax and capital expenditure of �1.3 million. At 30 September
2007, the Group had cash at bank of �7.6 million (2006: �7.0 million).
The Group has prepared these interim results using accounting policies
consistent with International Financial Reporting Standards (IFRS). Mulberry has
not published a separate IFRS transition statement as the impact is not material
to the Group's profit and loss account or balance sheet. Full details are shown
in note 6.
BUSINESS REVIEW
We are following a two pronged strategy of completing our UK retail network in
the 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 the
year, as we continue to build a strong platform for future growth. Our focus
continues to be the development of Mulberry as a global luxury brand. The
immediate financial impact of this is the increase in marketing and advertising
costs 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 the
USA and two department store corners in Korea. In the next six months the pace
will 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 seven
concessions 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 the
period. In the next six months we will open new shops in Covent Garden, Heathrow
Terminal 5 and two concessions in department stores. In addition, we have opened
a new outlet shop at Cheshire Oaks. For the twenty six weeks to 29 September
2007, sales at our UK shops increased by 38% and like for like sales, for the
same period, increased by 11%. This substantial sales growth in more challenging
market conditions reflects the strength of our product range. In particular, the
new Mabel bags introduced this Autumn and carried by celebrities such as Kate
Moss, Keira Knightley and Kate Bosworth have become immediate best sellers and,
despite increasing production substantially, we have been unable to keep up with
demand for purple patent Bayswater bags, which continue to be extremely popular.
Wholesale accessories orders for Autumn/Winter 2007 reduced by 13% as we
continued to change the distribution pattern in both the UK and overseas
markets. Due to the timing of deliveries, shipments to wholesale customers in
the first half were approximately 20% below the previous year. The wholesale
order book for Spring/Summer 2008 is growing with orders up by 6% compared to
the same point in the prior year.
Our factory at The Rookery, Chilcompton, Somerset, is an extremely valuable part
of our brand DNA. Manufacturing in the UK is a significant challenge which our
team tackles with energy and enthusiasm. In the last year, we have increased the
manufacturing space, changed the production method and invested in new machinery
all 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 acceleration
in the rate of new shop openings in the next six months and a strong Spring 2008
collection. 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 same
period increased by 9%.
We have agreed to develop the main markets in the Middle East with the Chaloub
Group, a leading luxury brand distributor for the region. The new shops that
will open in Jeddah in Saudi Arabia and Kuwait are a result of this new
partnership.
In the USA, Christmas will mark the first full year of trading for the shops. As
planned, our partners will not open more stores until we both feel comfortable
that we have successfully built awareness in this market through our
advertising, PR and marketing activities.
We continue to see sales growth, which we believe is due to a combination of
factors including the strength of our new product introductions, our investment
in the international markets and a level of insulation amongst luxury consumers
from the vagaries of the high street, however, we are not immune to factors that
affect general retailing conditions and the Christmas period, as always, will
have a substantial impact on our year end results.
Looking forward, the Group has developed a business model which is increasing
sales and generating profit and cash, which will be used to invest in building
consumer demand internationally. While this will hold back profits in the short
term, we believe that this will deliver the greatest shareholder value in the
medium term and is an essential part of our strategy of building Mulberry into a
global luxury brand.
DIVIDENDS
The full year dividend of 1.5 pence per ordinary share, announced with the final
results in June 2007 was paid on 15 August 2007. The Board plan to consider a
dividend in respect of the current full year when the final results are
available in June 2008. The Board is not recommending the payment of an interim
dividend on the ordinary shares.
STAFF
As always, I would like to take this opportunity to thank all of our staff and
our partners for their enthusiasm and commitment to Mulberry and its strategy.
The achievements of the last six months would not have been possible without
them.
I would also like to express my gratitude to Guy Rutherford who has been Finance
Director for the past nine years and who has been a key member of the team that
has transformed the Company. He is moving on to a more entrepreneurial role
outside the Group as announced on 24 August 2007. His successor, Roger Mather,
is already in place after a smooth transition.
Godfrey Davis
Chairman and Chief Executive
13 December 2007
CONDENSED CONSOLIDATED INCOME STATEMENT
For 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 45,078
Cost of sales (9,164) (8,984) (18,818)
---------- ---------- ----------
GROSS PROFIT 12,353 11,671 26,260
Administrative expenses (11,264) (9,211) (19,588)
---------- ---------- ----------
OPERATING PROFIT 1,089 2,460 6,672
Share of results of associates 1 (234) (498)
Finance income 226 137 324
Finance expense (62) (140) (298)
---------- ---------- ----------
PROFIT BEFORE TAXATION 1,254 2,223 6,200
Taxation 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 SHEET
At 30 September 2007
(Restated under IFRS)
Unaudited Unaudited Audited
30 September 30 September 31 March
2007 2006 2007
�'000 �'000 �'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 1,872 41 1,587
Property, plant and equipment 7,789 6,182 6,997
Interests in associates 164 435 152
Deferred tax assets 151 474 174
---------- ---------- ----------
9,976 7,132 8,910
CURRENT ASSETS
Inventories 7,085 6,508 6,688
Trade and other receivables 5,828 5,327 3,869
Cash and equivalents 7,609 6,959 10,271
---------- ---------- ----------
20,522 18,794 20,828
---------- ---------- ----------
TOTAL ASSETS 30,498 25,926 29,738
========== ========== ==========
LIABILITIES
CURRENT LIABILITIES
Trade 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 LIABILITIES
Bank 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
========== ========== ==========
EQUITY
Share capital 2,871 2,471 2,474
Share premium 7,007 4,605 4,633
Revaluation reserve 33 63 49
Capital redemption reserve 154 154 154
Special reserve 1,467 1,467 1,467
Retained earnings 8,106 5,607 8,186
Forex reserve (15) (50) (94)
---------- ---------- ----------
TOTAL EQUITY AND RESERVES 19,623 14,317 16,869
========== ========== ==========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For 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 1,067
Loss on sale of plant and equipment - - 2
Employee share-based payments (credit)/charge (49) 51 102
---------- ---------- ----------
OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING 1,654 3,012 7,843
CAPITAL
---------- ---------- ----------
Increase in stocks (397) (541) (721)
(Increase)/decrease in debtors (1,958) (366) 1,093
Increase/(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 226 137 324
Purchase of tangible fixed assets (2,505) (1,707) (2,335)
Sale of tangible fixed assets - - 10
Purchase of intangible assets - - (1,517)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (2,279) (1,570) (3,518)
---------- ---------- ----------
FINANCING ACTIVITIES
Dividends paid (861) (490) (490)
Repayments of obligations under finance leases (15) (20) (43)
Proceeds on issue of shares 207 60 90
New 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) 2,989
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE 10,271 7,282 7,282
PERIOD
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 7,609 6,959 10,271
========== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For 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 period
Exchange 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 EQUITY
For 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 period
Ordinary dividend paid (861) (490) (490)
New shares issued 207 60 90
Conversion of preference shares 2,563 - -
Employee share-based payments (credit)/charge (49) 51 102
Finance 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 the
Companies Act 1985. The address of the registered office is given in note 8.
These condensed interim financial statements do not comprise statutory accounts
under the meaning of Section 240 of the Companies Act 1985. Statutory accounts
for the year ended 31 March 2007, as prepared under United Kingdom Generally
Accepted Accounting Principles, were approved by the Board of Directors on 20
June 2007 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an emphasis of
matter 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 using
accounting 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 statements
under IFRS. The first full set of consolidated financial statements under IFRS
will be for the year ending 31 March 2008.
The transition to IFRS has resulted in a number of changes in the reported
consolidated financial statements, notes thereto and accounting principles
compared to previous annual reports which were prepared under applicable United
Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative
information has been restated in accordance with IFRS. Note 6 provides further
details on the transition from UK GAAP to IFRS. The date of transition to IFRS
was 1 April 2006 (transition date). Details of the accounting policies adopted
by the Group under IFRS are disclosed in note 7.
These condensed interim financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in which the
Group operates. Foreign operations are included in accordance with the policies
set 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 the
following Standards and Interpretations, which have not been applied in these
condensed 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 Funding
Requirements and their Interaction'.
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the
consolidated 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 is
no impact of that change in accounting policy on the interim consolidated
financial statements. Full details of the change will be disclosed in our
report 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 exemptions
from 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 effective
tax rate to the interim profit.
4. Earnings per ordinary share
Basic earnings per ordinary share has been calculated by dividing the profit on
ordinary activities after taxation for each period by the weighted average
number of ordinary shares in issue during the period.
Diluted earnings per share has been calculated by dividing the profit on
ordinary activities after taxation, excluding the interest and finance costs
relating to the preference shares for each period by the weighted average
potential ordinary shares, calculated by taking account of the potential
conversion 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 average
number of shares
in issue 56,517 48,943 48,974
Weighted average
potential ordinary
shares 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 the
subscription agreement between the Company and Challice Limited, announced on 17
August 2000 and approved by shareholders on 11 September 2000, were converted
into 8,000,000 ordinary shares of 5p each following satisfaction of the relevant
conditions set out in the Company's articles of association. As a consequence
Challice Limited's shareholding in the share capital of the Company increased to
34,212,144 shares.
6. Transition to IFRS
As stated in note 2, these are the Group's first condensed interim financial
statements 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 effects
of the transition on the IFRS opening balance sheet as at 1 April 2006 and for
the periods ending 30 September 2006 and 31 March 2007. Additionally they show
the reconciliation of the profit and loss reported under UK GAAP for the periods
ended 30 September 2006 and 31 March 2007 to IFRS.
All explanations should be read in conjunction with the IFRS accounting policies
of 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 �'000
ASSETS
NON-CURRENT ASSETS
Intangible assets - - 24 - 24
Property, plant and equipment 5,228 - (24) - 5,204
Interests in associates 730 - - - 730
Deferred tax assets 277 - - 194 471
-------- -------- -------- -------- --------
6,235 - - 194 6,429
CURRENT ASSETS
Inventories 5,967 - - - 5,967
Trade and other receivables 4,962 - - - 4,962
Cash and equivalents 7,282 - - - 7,282
-------- -------- -------- -------- --------
18,211 - - - 18,211
-------- -------- -------- -------- --------
TOTAL ASSETS 24,446 - - 194 24,640
======== ======== ======== ======== ========
LIABILITIES
CURRENT LIABILITIES
Trade 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 LIABILITIES
Preference 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
======== ======== ======== ======== ========
EQUITY
Share capital 2,467 - - - 2,467
Share premium 4,547 - - - 4,547
Revaluation reserve 80 - - - 80
Capital redemption reserve 154 - - - 154
Special reserve 1,467 - - - 1,467
Retained earnings 4,737 (250) - 75 4,562
Forex 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 �'000
ASSETS
NON-CURRENT ASSETS
Intangible assets - - 41 - - 41
Property, plant and equipment 6,223 - (41) - - 6,182
Interests in associates 435 - - - - 435
Deferred tax assets 278 - - - 196 474
-------- -------- -------- -------- -------- --------
6,936 - - - 196 7,132
CURRENT ASSETS
Inventories 6,508 - - - - 6,508
Trade and other receivables 5,327 - - - - 5,327
Cash and equivalents 6,959 - - - - 6,959
-------- -------- -------- -------- -------- --------
18,794 - - - - 18,794
-------- -------- -------- -------- -------- --------
TOTAL ASSETS 25,730 - - - 196 25,926
======== ======== ======== ======== ======== ========
LIABILITIES
CURRENT LIABILITIES
Trade 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 LIABILITIES
Preference 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
======== ======== ======== ======== ======== ========
EQUITY
Share capital 2,471 - - - - 2,471
Share premium 4,605 - - - - 4,605
Revaluation reserve 63 - - - - 63
Capital redemption reserve 154 - - - - 154
Special reserve 1,467 - - - - 1,467
Retained earnings 5,738 (258) - 50 77 5,607
Forex 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 �'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 1,499 - 88 - - 1,587
Property, plant and equipment 7,085 - (88) - - 6,997
Interests in associates 152 - - - - 152
Deferred tax assets - - - - 174 174
-------- -------- -------- -------- -------- --------
8,736 - - - 174 8,910
CURRENT ASSETS
Inventories 6,688 - - - - 6,688
Trade and other receivables 3,869 - - - - 3,869
Cash and equivalents 10,271 - - - - 10,271
-------- -------- -------- -------- -------- --------
20,828 - - - - 20,828
-------- -------- -------- -------- -------- --------
TOTAL ASSETS 29,564 - - - 174 29,738
======== ======== ======== ======== ======== ========
LIABILITIES
CURRENT LIABILITIES
Trade 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 LIABILITIES
Bank 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
======== ======== ======== ======== ======== ========
EQUITY
Share capital 2,474 - - - - 2,474
Share premium 4,633 - - - - 4,633
Revaluation reserve 49 - - - - 49
Capital redemption reserve 154 - - - - 154
Special reserve 1,467 - - - - 1,467
Retained earnings 8,274 (260) - 94 78 8,186
Forex 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 SIX
MONTHS 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 - - 20,655
Cost of sales (8,984) - - (8,984)
-------- -------- -------- --------
GROSS PROFIT 11,671 - - 11,671
Administrative expenses (9,203) (8) - (9,211)
-------- -------- -------- --------
OPERATING PROFIT 2,468 (8) - 2,460
Share of results of associates (234) - - (234)
Finance income 137 - - 137
Finance expense (140) - - (140)
-------- -------- -------- --------
PROFIT BEFORE TAXATION 2,231 (8) - 2,223
Taxation (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 YEAR
ENDED 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 - - 45,078
Cost of sales (18,818) - - (18,818)
-------- -------- -------- --------
GROSS PROFIT 26,260 - - 26,260
Administrative expenses (19,578) (10) - (19,588)
-------- -------- -------- --------
OPERATING PROFIT 6,682 (10) - 6,672
Share of results of associates (498) - - (498)
Finance income 324 - - 324
Finance expense (298) - - (298)
-------- -------- -------- --------
PROFIT BEFORE TAXATION 6,210 (10) - 6,200
Taxation (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 first
market 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 lease
term.
As a result the Group's IFRS opening balance sheet as at 1 April 2006 includes
additional deferred lease incentives income of �250k and an associated tax asset
adjustment of �75k. In respect of the six months ended 30 September 2006 and the
year ended 31 March 2007 adjustments have been made to decrease the deferred
lease incentives amortisation by a further �8k and �10k respectively, with an
associated deferred tax adjustment of �2k and �3k respectively.
b. Under IFRS, computer software is classified as an intangible asset 'where
the software is not an integral part of the related hardware'. This means that
application software costs that have been capitalised as tangible fixed assets
must now be reclassified to intangible assets. The effect is to increase the
intangible 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 and
31 March 2007 respectively.
c. Under IFRS, cumulative translation differences that arise on translation of
foreign 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 financial
statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 March each year. Control is achieved where the
Company has the power to govern the financial and operating policies of each
investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of in any year are included in
the consolidated profit and loss account from the date of acquisition or up to
the date of disposal.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Goodwill
Goodwill written off to reserves under UK GAAP prior to 1998 has not been
reinstated and is not included in determining any subsequent profit or loss on
disposal.
Intangible assets
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation. Amortisation is charged to the income statement over
the estimated useful life of the asset.
Computer software that is integral to a related item of hardware is included as
property, plant and equipment. All other computer software is recorded as an
intangible asset.
Property, plant and equipment
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated 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 useful
lives, using the straight-line method, on the following bases:
Freehold buildings 5%
Short leasehold land and buildings over the term of the lease
Fixtures, fittings and equipment 10% to 33%
Plant and equipment 20%
Motor vehicles 25%
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in income.
Assets in the course of construction are not depreciated. Depreciation on these
assets 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 its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually 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 in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset 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 to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is 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 recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Investments in subsidiary undertakings and associates
Investments in subsidiaries are stated at cost less provision for any impairment
in value.
An associate is an entity over which the Group is in a position to exercise
significant influence. The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method of
accounting. Investments in associates are carried in the balance sheet at cost
as adjusted by post-acquisition changes in the Group's share of the net assets
of the associate, less any impairment in the value of individual investments.
Losses of the associates in excess of the Group's interest in those associates
are not recognised.
Any excess of the cost of acquisition over the Group's share of the fair values
of the identifiable net assets of the associate at the date of acquisition is
recognised as goodwill. Any deficiency of the cost of acquisition below the
Group's share of the fair values of the identifiable net assets of the associate
at the date of acquisition (i.e. discount on acquisition) is credited in profit
or loss in the period of acquisition.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises materials, direct labour costs and those overheads incurred in
bringing the inventories to their current location and condition. Cost is
calculated using the standard cost method. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the
Group's obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme.
Research and development
Expenditure on research is written off against profits as incurred. Where
development expenditure meets the criteria of IAS 38, such expenditure is
capitalised and amortised over its useful life.
Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each Group company are expressed in pounds
sterling, which is the functional currency of the Company, and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period except for
differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary
items, any exchange component of that gain or loss is also recognised directly
in equity.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the date
of the transactions are used. Exchange differences arising, if any, are
classified as equity and transferred to the Group's translation reserve. Such
translation differences are recognised as income or as expenses in the period in
which the operation is disposed of.
Operating profit
Operating profit is stated after charging restructuring costs but before the
share of results of associates, investment income and finance costs.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's balance
sheet when the Group becomes a party to the contractual provisions of the
instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value 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 other
short-term highly liquid investments that are readily convertible to a known
amount 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 the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
accrual basis in profit or loss using the effective interest rate method and are
added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
Convertible redeemable preference shares
Convertible preference shares are regarded as compound instruments, consisting
of a liability component and an equity component. At the date of issue, the fair
value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible debt. The difference between the
proceeds of issue of the convertible preference shares and the fair value
assigned to the liability component, representing the embedded option to convert
the liability into equity of the Group, is included in equity.
Issue costs are apportioned between the liability and equity components of the
convertible preference shares based on their relative carrying amounts at the
date of issue. The portion relating to the equity component is charged directly
against 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 the
normal course of business, net of discounts, VAT and other sales-related taxes
and intra-group transactions. Sales of goods are recognised when goods are
delivered and title has passed.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of 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 transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their
fair value or, if lower, at the present value of the minimum lease payments,
each determined at the inception of the lease. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the
lease obligation so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease 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 constructive
obligation as a result of a past event, and where it is probable that an outflow
will be required to settle the obligation. Provisions are measured at the
Directors' best estimate of the expenditure required to settle the obligation at
the balance sheet date and are discounted to present value where the effect is
material.
Share-based payments
The Group has applied the requirements of 'IFRS 2 Share-based payments' to all
grants of equity instruments after 7 November 2002 that were unvested at 1 April
2006.
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.
8. Approval and distribution
This report was approved by the Board of Directors on 12 December 2007 and is
being sent to all shareholders. Copies are available on the Group's website
(www.mulberrygroupplc.com) or from the Company Secretary at the Company's
registered office:
The Rookery
Chilcompton
Bath
Somerset
BA3 4EH
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF MULBERRY GROUP PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007 which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated cash flow statement, the
consolidated statement of recognised income and expense, the consolidated
reconciliation of movements in equity, and related notes 1 to 7. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the Company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report have been prepared in accordance with the accounting policies the Group
intends to use in preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
The interim results for the six months ended 30 September 2006 have not
previously been reported on as the Directors took the option not to have a
review completed. Accordingly, we have not reviewed the comparative information
for the six months ended 30 September 2006.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with the AIM Rules of the London Stock
Exchange.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
Bristol, UK
13 December 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFFFWESWSEFE
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