RNS No 0941r
MULBERRY GROUP PLC
26th August 1998
MULBERRY GROUP plc
PRELIMINARY RESULTS FOR THE
YEAR ENDED 31 MARCH, 1998
Mulberry Group plc, the international leathergoods, clothing,
and interior design brand, announces its preliminary results
for the year ended 31 March, 1998.
HIGHLIGHTS
1998 1997
Turnover #30.9m #31.7m
Operating profit before exceptional costs #0.4m # 2.5m
Profit/(loss) before tax #(1.0m)* # 1.7m
Earnings/(loss) per share (3.51)p 5.8p
Dividends per share 1.5p 1.5p
* includes exceptional costs of #0.6m announced in March 1998
Roger Saul, Mulberry's Chairman and Chief Executive, comments:
"In the short to medium term, we plan to build upon the
strengths of our four divisions. Central to this will be
improving and recovering the market share of our Accessories
division. In the UK we will capitalise on the opening of the
King's Road, London and Manchester stores whilst continuing to
develop our presence in Continental Europe and Scandinavia.
In Asia, we are discussing a supply, licensing and
distribution agreement for China, Taiwan and Hong Kong, which
will bring potential product sourcing advantages as well. In
Japan, our appointed advisers have identified potential new
license and distribution partners and discussions are in
progress. In the USA, we have developed a business plan and
appointed advisers to locate a suitable partner. An update on
these initiatives will be included with the next interim
statement.
Whilst we continue to experience the knock-on effects of the
strong pound, substantial action has been taken to improve
overall efficiency and to reduce the cost base. This includes
moving a substantial proportion of production of Accessories
to Europe to create a natural currency hedge.
In addition, the actions taken to simplify the product
range and to reduce costs show increasing benefits. Stocks at
the end of the first quarter were more than #2.0m lower than
at the same time last year and further progress in this area
is expected.
Trading in the first quarter is in line with budget. This,
taken together with the benefits arising from the actions
already taken, leads us to expect an improving performance in
the current year."
For further information, please contact:
Mulberry Group plc On 26 August, 1998 0171 253 2252
Thereafter 01749 340500
Roger Saul, Chairman & Chief Executive
Godfrey Davis, Finance Director
Ludgate Communications 0171 253 2252
Tim Davis
CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW
The year to 31 March, 1998 was one of the most challenging
periods in the Group's 26 year history. We faced the
deterioration of export sales and margin due to the sustained
strength of sterling combined with the collapse in the Far
East. At home, our strong tourist business was seriously
affected by the strong pound.
The operating profit before exceptional costs was reduced to
#0.4m (1997: #2.4m). After exceptional costs of #0.6m and
interest of #0.8m, the loss before tax was #1.0m (1997: profit
#1.7m) which is in line with market expectations following the
trading statement issued on 3 March, 1998. Sales were broadly
maintained at #30.9m (1997: #31.7m), a reduction of 2.5%.
This is after taking into account the strength of sterling
which had an impact on sales of #3.5m and on profits of #2.2m.
In line with our commitment to restore shareholder value,
build margins and cut overhead costs, we announced in March
that it was necessary to undertake a significant cost
reduction and redundancy programme which resulted in one-off
costs of #0.6m. This comprised: the closure of the small
Somerton, Somerset production unit; redundancy costs arising
from staff reductions at all levels; and the costs associated
with the consolidation of the French and German wholesale
operations into single sites in each country. The reported
loss before tax of #1.0m takes into account these one-off
costs.
Losses per share are therefore 3.5p (1997: earnings of 5.8p).
As announced in March, the final dividend will be maintained
at 0.75p, making a total distribution for the year of 1.5p
(1997: 1.5p). The dividend will be payable on 25 November,
1998 to shareholders on the register at 9 October, 1998. On
this occasion, shareholders can elect to take a scrip
dividend. This is subject to approval by shareholders at the
Annual General Meeting on 1 October, 1998.
TRADING OVERVIEW
In the UK, despite the well-documented shortfall in visiting
tourists, sales rose by approximately 10%.
In Continental Europe and Scandinavia, sales were depressed,
largely by the strength of sterling.
As reported last year, 1997/8 was expected to be a year of
significant expansion in Japan. Unfortunately, our
distributor in Japan, Moonbat, announced serious losses and
indicated that as a result of the worsening economic
situation, it would withdraw from its imported brand business
to concentrate on core activities.
Since 31 March, 1998, we have negotiated a favourable
settlement with Moonbat, which includes, with effect from 1
September, 1998, the take-over of the two key stores in Tokyo,
including the flag ship store in Marunouchi. We still believe
that Japan holds significant opportunities and we continue
discussions with potential new partners.
RETAIL
The retail division comprises wholly-owned outlets in the UK,
Germany and France. Sales in this division increased by 10% on
last year. The Mulberry shops in the remainder of Europe,
Scandinavia and the Far East are franchised.
In the UK, sales to domestic customers have shown solid
growth, but our statistics show that the usual sales to
visitors from abroad have halved. Despite this, the flagship
store in Bond Street, London had another successful year and
the store in Terminal Four at Heathrow showed good growth.
Mulberry stores in Europe have performed creditably given the
conditions being experienced across much of the continent. In
Scandinavia, the franchised stores have performed
satisfactorily.
In the light of the difficult wholesale trading conditions, we
focused resources on developing Mulberry franchise shops. I
am pleased to announce that five new franchises in Europe were
opened in Aarhus, Lisbon, Paris, Berlin and Istanbul
demonstrating continued following for the Mulberry brand.
We have also undertaken a strong drive into the Middle East
market opening two new stores in Dubai and a Duty Free
operation. Further stores are planned for Bahrain, Kuwait and
the Lebanon over the next 12 months.
ACCESSORIES
This division comprises leathergoods design, manufacture and
distribution.
The key markets for this division are the UK and Europe. In
the UK wholesale and retail sales have been encouraging but
the value of sales to Europe has fallen due to the effect of
the strength of sterling. In light of this and the
difficulties encountered in Japan, sales in this division
reduced by 10% on the previous year.
In response, the Group has reduced the scale of its own
manufacturing and moved a substantial proportion of the
production to European sub-contractors. This programme was
initiated during the year under review once the stringent
quality control process was concluded to our satisfaction.
Deliveries commenced in the Spring 1998 season and will
increase to 50% of our production in the current year.
Despite this move, our own factories remain extremely
efficient. As a management team we have tried to balance our
resourcing to retain the best and most flexible opportunities
for the future.
READY TO WEAR
This division comprises ready to wear clothing design,
resourcing and distribution.
The major management emphasis for the year was on margin
enhancement through the rationalisation and improvement of the
product range, where solid progress was achieved. Sales of
this division were unchanged on the prior year.
HOME
This division comprises the design of interior products,
resourcing and distribution. The key factor which held back
sales was the strength of sterling which has particularly hit
European markets. As a result, it achieved more modest growth
than last year with a sales increase of 2.0%.
We have continued to invest in this division and opened a
combined Home flagship store and trade showroom in the Kings
Road, London in November 1997 which is trading satisfactorily.
PERSONNEL
As mentioned earlier, it was necessary to undertake a
redundancy programme during the year. I am grateful to all of
those who have accepted new or different responsibilities as a
result of the organisational changes that this necessitated.
It is a real accolade to all our staff who with their
continued enthusiasm and commitment to creating a truly
international brand enabled us to renew our Investors in
People award.
The pay reductions for the Group Board, which were announced
at the time of the interim results, have continued into the
new financial year.
In March, Judy Harrison Bode joined the Board as a non-
executive director. She brings with her extensive experience
of the accessories and fashion industries in the USA, gained
with Liz Claiborne and The Monet Group, amongst others.
Another important appointment is Graham Sim who has joined the
Group as Director of Marketing after a successful career with
Clarks mens shoes.
STRATEGIC UPDATE
In the short to medium term, we plan to build upon the
strengths of our four divisions. Central to this will be
improving and recovering the market share of our Accessories
division. In the UK we will capitalise on the opening of the
King's Road, London and Manchester stores whilst continuing to
develop our presence in Continental Europe and Scandinavia.
Elsewhere we are actively engaged in discussions with
potential partners to develop our business in Asia, Japan and
the USA.
In Asia, we are discussing a supply, licensing and
distribution agreement for China, Taiwan and Hong Kong, which
will bring potential product sourcing advantages as well. In
Japan, our appointed advisers have identified potential new
license and distribution partners and discussions are in
progress. In the USA, we have developed a business plan and
appointed advisers to locate a suitable partner. An update on
these initiatives will be included with the next interim
statement.
OUTLOOK
Whilst we continue to experience the knock-on effects of the
strong pound, substantial action has been taken to improve
overall efficiency and to reduce the cost base. This includes
moving a substantial proportion of production of Accessories
to Europe to create a natural currency hedge as explained
above. In addition, the actions taken to simplify the product
range and to reduce costs show increasing benefits. Stocks at
the end of the first quarter were more than #2.0m lower than
at the same time last year and further progress in this area
is expected.
Trading in the first quarter is in line with budget. This,
taken together with the benefits arising from the actions
already taken, leads us to expect an improving performance in
the current year.
Roger Saul
Chairman and Chief Executive
Consolidated profit and loss account
For the year ended 31 March, 1998
1998 1997
#'000 #'000
Turnover 30,926 31,673
Cost of sales (16,175) (15,710)
-------- ---------
Gross profit 14,751 15,963
Other operating expenses (net) (14,354) (13,504)
------- ---------
Operating profit before exceptional items 397 2,459
Redundancy and other non-recurring costs ( 602) -
-------- ---------
Operating profit (205) 2,459
Interest payable and similar charges (net) (794) (781)
Group share of profit related companies - 6
-------- ---------
Profit on ordinary activities before (999) 1,684
taxation
Tax on profit on ordinary activities 272 (505)
-------- ---------
Profit on ordinary activities after
taxation, being profit for the financial (727) 1,179
year
Dividends paid and proposed on equity (239) (310)
shares -------- --------
Retained profit/loss for the year (966) 869
Earnings/(loss) per ordinary share (3.51)p 5.8p
--------- --------
Consolidated balance sheet
31 March, 1998
1998 1997
#'000 #'000
Fixed assets
Tangible assets 6,195 5,828
Investments 117 113
-------- --------
6,312 5,941
Current Assets
Stocks 7,934 7,907
Debtors 6,384 6,439
Cash at bank 36 136
-------- --------
14,354 14,482
Creditors: Amount falling due within (11,200 (9,253)
one year -------- --------
Net current assets 3,154 5,229
Total assets less current liabilities 9,466 11,170
Creditors: Amounts falling due after (3,292) (3,778)
more than one year
Provisions for liabilities and charges (10) (15)
--------- --------
Net assets 6,164 7,377
--------- --------
Capital and reserves
Called-up share capital 1,036 1,036
Share premium account 3,257 3,257
Revaluation reserve 328 359
Capital redemption reserve 154 154
Other reserves - 700
Profit and loss account 1,389 1,871
--------- --------
Equity shareholders' funds 6,164 7,377
--------- --------
Consolidated cash flow statement
For the year ended 31 March, 1998
Restated
1998 1997
#'000 #'000
Net cash inflow from operating activities 47 602
Returns on investments and servicing of (794) (803)
finance
Taxation (242) (120)
Capital expenditure and financial (779) (514)
investment
Equity dividends paid (239) (155)
-------- --------
Cash (outflow) inflow before financing (2,007) (990)
Financing (367) 215
-------- --------
(Decrease) increase in cash in the year (2,374) (775)
-------- --------
Reconciliation of net cash flow to movement in net debt
Restated
1998 1997
#'000 #'000
(Decrease) increase in cash in the year (2,374) (775)
Cash outflow from decrease in debt and 367 3,631
lease financing --------- -------
(2,007) 2,856
Inception of finance leases (518) (687)
--------- -------
Movement in net debt (2,525) 2,169
Net debt, beginning of year (7,112) (9,281)
--------- -------
Net debt, end of year (9,637) (7,112)
--------- -------
Consolidated statement of total recognised gains and losses
For the year ended 31 March 1998
1998 1997
#'000 #'000
Profit/loss for the financial year (727) 1,179
Currency translation differences on foreign (247) (174)
currency net investments --------- -------
Total recognised gains and losses in the year (974) 1,005
--------- -------
Consolidated note of historical cost profits and losses
For the year end 31 March 1998
1998 1997
#'000 #'000
Reported profit/(loss) on ordinary activites (999) 1,684
before taxation
Difference between historical cost depreciation
charge and the actual depreciation charge for 31 31
the year calculated on the revalued amount --------- -------
Realisation of revaluation reserve on disposal - -
of property
Historical cost profit on ordinary activities (968) 1,715
before taxation
Historical cost profit for the year retained (935) 900
after taxation and dividends --------- -------
Notes
1. The financial information set out above does not constitute
the Company's statutory accounts. Statutory accounts for
the year ended 31 March, 1997 have been filed with the
Registrar of Companies. The Statutory accounts for the year
ended 31 March, 1998 will be filed at Companies House
upon receiving the approval of the Annual General Meeting.
The auditors have reported on the accounts for the year
ended 31 March, 1997 and their report was unqualified
and did not contain a statement under section 237(2) or (3)
of the Companies Act 1985.
2. The 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.
3. Earnings per share are calculated on 20,722,941 (1997:
20,177,709) ordinary shares being the weighted average
number of shares in issue during the year.
4. The Directors declared an interim dividend of 0.75p per share
which was paid on 27 February, 1998. Roger Saul and Godfrey
Davis waived their entitlement to interim dividends payable
on 27 February, 1998 of #59,000 and #11,000 respectively. A
final dividend of 0.75p per share is proposed to be paid on
25 November, 1998 to shareholders on the register at the
close of business on 9 October 1998.
5. Copies of the Annual Report and Accounts will be posted to
shareholders. Further copies can be obtained from Mulberry
Group plc's registered office at Kilver Court, Shepton
Mallet, Bath, BA4 5NF.
6. The Annual General Meeting will be held at Mulberry Group
plc's registered office, Kilver Court, Shepton Mallet, Bath,
BA4 5NF on 1 October, 1998.
Copies of this announcement are available for a period of 14 days
from the date hereof from the company's registered office, Kilver
Court, Shepton Mallet, Bath, BA4 5NF, and from the company's
nominated adviser, Teather & Greenwood, 12-20 Camomile Street,
London, EC3A 7NN.
END
FR AVARKWVKWUUR
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