RNS No 5211q
MULBERRY GROUP PLC
12th January 1998
Mulberry Group Plc
Interim results for the six months ended 30 September, 1997
Mulberry Group Plc, the AIM-listed designer and manufacturer
of a portfolio of accessories, ready to wear clothing and
interior design products, today announced its interim results.
This follows the trading update issued by the company on
17 December, 1997.
SUMMARY
- Turnover #13.8 million (1996: #13.6 million)
- Loss before tax #0.72 million (1996: #0.48 million)
- Loss per share 2.3p (1996: loss per share 1.6p)
- Dividend per share 0.75p (1996: 0.75p)
- Cost reduction programme implemented
Commenting on the outlook, Roger Saul, Chairman and Chief
Executive said:
"We are committed to restoring shareholder value and continue
to take action to improve the competitiveness of our products,
to build margins, to cut overhead costs and to materially
reduce stock levels."
For further information, please contact:
Mulberry Group Plc (On 12.1.98) 0171 253 2252
Roger Saul, Chairman and Chief Executive (Thereafter) 01749 340500
Godfrey Davis, Group Finance Director
Ludgate Communications 0171 253 2252
Tim Davis
Sarah Harper
CHAIRMAN'S STATEMENT
Interim results for the six months to 30 September, 1997
It was with regret that we had to announce in December 1997
that Mulberry's profits for the year ending 31 March, 1998
would fall short of market expectations. This was due to a
number of factors which I shall address in this statement and
will go on to review trading, our strategy going forward and
the current situation.
Financial review
Turning to the six months to 30 September, 1997, sales were
maintained at #13.8m (1996: #13.6m), producing a loss before
tax of #0.72m (loss #0.48m). Earnings per share show a loss
of 2.3p, (loss 1.6p). The Board is recommending an interim
dividend of 0.75p, (0.75p) which will be payable on 27
February, 1998 to shareholders on the register at 30 January,
1998. In December's trading update, we advised that, subject
to unforeseen circumstances, the dividend for the full year
will also be maintained at 1.5p per share.
Operating costs increased by 14.7%. This reflected a budgeted
increase in sales which was not achieved because of the
strength of sterling. The majority of the cost increase was
accounted for by additional sales and marketing costs.
The balance sheet at 30 September, 1997 shows stocks increased
to #9.6m compared to #7.9m at 31 March, 1997. Stocks increased
as a result of anticipated sales which did not materialise.
However, #9.6m was the highest point and by the end of
November, 1997 stocks had reduced to #8.8m. Bank borrowings
at 30 September, 1997 which is approaching the peak of
Mulberry's annual cycle had increased to #8.4m, representing
gearing of 135% (124%).
Sterling
In late December we made a trading statement to the City.
When we reviewed the position we took two factors into
account. Firstly, our forward sales to international third
party retailers for Spring/Summer 1998 were not living up to
expectations and secondly, our own UK retail performance was
lacklustre and had not lifted off as anticipated.
Overall, the continued strength of sterling against the
European and Far Eastern currencies has had a dramatic effect
upon our business this year. We calculate that we have lost
over #2.4 million of sales in the first half alone.
Trading overview
Sales in the Accessories Division were down 5% from #7.2m to
#6.85m, although margins increased by 2%. This reflects
markedly reduced consumer spending across Continental Europe,
mainly as a result of the strength of sterling and the
continuing and more difficult economic circumstances. In the
Ready to Wear Division, sales increased 20% from #3.0m to
#3.6m on unchanged margins, mainly due to improvements in the
product range. Our newest division, Home, increased sales by
14% to #2.1m, with margins unchanged, and more resilient
demand from the UK and US markets evident.
In Japan, our distributor, Moonbat, has stopped its investment
programme in direct response to the worsening economic
environment and its own changing financial circumstances. To
date, Moonbat has opened one flagship store in Tokyo and there
are nine other outlets.
The Retail Division increased sales by 10% from #5.2m to
#5.7m, due to sound performances by Mulberry stand alone
shops, in particular the Bond Street, London, flagship store.
However, Mulberry outlets within London department stores did
not perform according to our expectations, hit particularly by
the lack of tourists.
In our European shops, we had sales increases in local
currency of 10% which when translated to sterling became a net
downturn of 5%.
Cost reduction programme
With the increasingly difficult European and Far East
environment and the continuing strength of sterling becoming
apparent, we concluded that there was a need to reduce our
cost base. Since October, we have initiated a number of staff
reductions at all levels and have continued to rationalise our
product range.
We have reviewed our overseas wholesale sales operations and
have consolidated the French and German operations into a
single site in each country.
Redundancy and closure costs of approximately #400,000 have
been incurred. These have been taken into account in the
revised profit figure included in December's statement. The
ongoing annual cost savings from these actions will largely
benefit the next financial year.
In the light of the increasingly difficult trading conditions
in the second half, the Group Board have taken pay reductions
of 12% and a salary freeze has been implemented across the
Group until 1 April, 1998.
Strategic update
In the short to medium term, we plan to build upon the
strengths of our four divisions - Accessories, Ready to Wear,
Home and Retail. Central to this will be recovering and
improving the market share of our Accessories Division. We
will also increase our sales and number of outlets in the UK,
whilst further developing our presence in Continental Europe
and Scandinavia. In light of the disappointing situation in
Japan, we are reviewing a number of options to take this
business forward.
We continue to believe that the USA has great potential and
the Home business continues to trade strongly in that market.
We continue to look for an appropriate partner who in the
medium to longer term can help to develop the wider
exploitation of the brand.
Outlook
There has been much talk in the media about Christmas trading.
Across Europe and the UK, sales have been flat in the period
up to mid December. However, sales were strong in the last
two weeks of 1997 and our UK retail business is showing an
increase of approximately 10% for the first nine months
compared to last year. This is below our expectations as
growth has exceeded 25% for each of the last two years, but is
in line with the trading statement issued in December.
The strength of sterling will continue to cause us discomfort
until it returns to a more realistic level. However, we
believe we have the team, the product and the brand to
overcome the problems we have experienced.
Despite these more difficult economic conditions there are
opportunities to increase our market share as evidenced by the
opening since September of the successful new Northern
flagship store in Manchester and the Home store in London's
King's Road. Further new franchise stores in Denmark, Lisbon
and Paris have been opened, with three more to follow - Dubai,
Istanbul and Berlin - before the end of the financial year.
This will constitute the greatest number of shop openings in a
six month period in the history of Mulberry.
We are committed to restoring shareholder value and continue
to take action to improve the competitiveness of our products,
to build margins, to cut overhead costs and to materially
reduce stock levels.
Roger Saul
Chairman and Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30.9.97 to 30.9.96 to 31.3.97
#'000 #'000 #'000
Turnover 13,770 13,608 31,673
Cost of sales (6,847) (7,238) (15,710)
--------- --------- ----------
Gross profit 6,923 6,370 15,963
Other operating expenses (net) (7,294) (6,355) (13,504)
--------- --------- ----------
Operating profit/(loss) (371) 15 2,459
Interest payable and similar charges (351) (490) (781)
Group share of profit of associated
company - - 6
--------- --------- ----------
Profit/(loss) on ordinary activities
before taxation (722) (475) 1,684
Tax on profit/(loss) on ordinary
activities (note 2) 242 162 (505)
--------- --------- ----------
Profit/(loss) for the period (480) (313) 1,179
Dividends (note 3) (155) (155) (310)
--------- --------- ----------
Retained profit/(accumulated loss) (635) (468) 869
========= ========= ==========
Earnings per share (note 4) (2.3p) (1.6p) 5.8p
Dividend per share 0.75p 0.75p 1.5p
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30.9.97 30.9.96 31.3.97
#'000 #'000 #'000
Fixed assets 5,987 5,917 5,941
Current assets
Stocks 9,697 6,782 7,907
Debtors 6,418 6,912 6,439
Cash - 7 136
--------- --------- ---------
16,115 13,701 14,482
Creditors: Amounts falling
due within one year (11,798) (9,390) (9,253)
--------- --------- ---------
Net current assets 4,317 4,311 5,229
--------- --------- ---------
Total assets less current liabilities 10,304 10,228 11,170
Creditors: Amounts falling due
after one year (3,541) (4,074) (3,778)
Provisions for liabilities
and charges (12) - (15)
--------- --------- ---------
Net assets 6,751 6,154 7,377
========= ========= =========
Capital and reserves
Called up share capital 1,036 991 1,036
Reserves 5,715 5,163 6,341
--------- --------- ---------
6,751 6,154 7,377
========= ========= =========
CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30.9.97 to 30.9.96 to 31.3.97
#'000 #'000 #'000
Operating profit/(loss) (371) 15 2,459
Depreciation 413 346 710
Increase in stocks (1,790) (732) (1,857)
Decrease/(increase) in debtors 21 (1,706) (1,497)
Increase in creditors 671 1,103 787
--------- --------- ----------
Net cash flow from operations (1,056) (974) 602
Interest (351) (256) (803)
Taxation - - (120)
Capital expenditure (459) (658) (514)
Dividends paid (155) - (155)
--------- --------- ----------
Net cash flow before financing (2,021) (1,888) (990)
Financing (352) 479 215
--------- --------- ----------
Increase/(decrease) in cash
in the period (2,373) (1,409) (775)
========= ========= ==========
NOTES
1. Accounting policies
The interim results contained in this report, which have
not been audited, have been prepared using accounting
policies consistent with those used in the preparation of
the annual report and accounts for the year ended 31
March, 1997.
2. Taxation
The corporation tax charge for the period is based on the
effective rate which it is estimated will apply for the
full year.
3. Dividends
The interim dividend will be paid on 27 February, 1998 to
shareholders on the register at the close of business on
30 January, 1998.
4. Earnings per share
The fully diluted earnings per share is not materially
different to the basic earnings per share.
5. Comparative figures
The comparative figures for the year ended 31 March, 1997,
which do not constitute statutory accounts, are abridged
from the company's statutory accounts which have been
filed with the Registrar of Companies. The report of the
auditors on these accounts was unqualified and did not
contain a statement under section 237 (2) or (3) of the
Companies Act 1985.
6. Approval and distribution
This report was approved by the Board of Directors on 9
January, 1998 and is being sent to all shareholders.
Additional copies are available from the Company Secretary
at the Registered office Kilver Court, Shepton Mallet,
Bath, BA4 5NF.
END
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