Mulberry Group PLC - Interim Results
January 28 1999 - 2:30AM
UK Regulatory
RNS No 7608r
MULBERRY GROUP PLC
28th January 1999
MULBERRY GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 1998
CHAIRMAN'S STATEMENT
Following a tough financial year ended 31 March 1998, our
plans for this financial year have been focused upon
reducing our stocks and the size of our ranges to more
optimum levels, whilst creating new product and endeavours
to take the business forward. We remain focused on
tightening operating expenses and reducing our borrowings.
The strength of sterling continued to have a material
negative impact on results in the period under review, by
reducing the sterling value of our export sales and
dramatically impacting upon the number of tourist shoppers
in London.
Financial review
Sales were #12.9 million (1997: #13.8 million) producing a
slightly reduced operating loss of #0.33 million (1997:
#0.37 million).
Sales were reduced due to the loss of sales to Japan (1997:
#0.45 million), resulting from the termination of the
relationship with our former distributor, combined with the
loss of sales to Europe, which were particularly badly
affected by the strength of sterling.
In the process of reducing our stock levels, gross profit
was reduced by #0.5 million. This was the result of
operating our factory below full capacity during the
process of stock reduction and not due to sale clearance
mark-downs. This is the main reason for the reduced gross
profit and will not be repeated next year.
Operating expenses reduced by 9% and on a like for like
basis by 13%. This was due to the cost savings initiated
last financial year and continued action in the current
financial year. In addition, operating expenses for the
period were reduced by #0.5 million received as
compensation for loss of sales from our former distributor
in Japan.
Interest costs increased due to the higher borrowings at
the beginning of the period and the increase in UK interest
rates compared to the prior period.
We have been successful in reducing stocks and borrowings.
The balance sheet at 30 September 1998 shows stocks
decreased by #2.5 million (25%) compared to one year ago.
Borrowings have reduced by #0.3 million since 31 March 1998
(1997: increase #2.0 million) showing the benefit of the
action that has been taken. 30 September is the peak
borrowing point in the normal business cycle.
Earnings per share show a loss of 2.7p (1997: loss 2.3p).
The Board is not recommending the payment of an interim
dividend and will consider the payment of a final dividend
once the results for the full year are available.
TRADING OVERVIEW
Accessories
Leather accessories remain our core product area. In line
with many other brands, our handbag sales have been
affected by the difficult trading conditions. However, our
new product areas of business travel with the "Flight"
luggage range and our small leather goods led by our new
Mulberry cover for the Psion "Series 5" hand held computer
have been a great success with escalating demand.
Ready To Wear
We have taken steps to restructure this division and have
substantially reduced costs and the width of the range.
Our Ladies Ready to Wear had a tough half year. We have
made changes to the management team and rationalised the
range and at this stage the Autumn/Winter 1999 season looks
promising.
Our Mens Ready to Wear for Spring/Summer 1998 had a
difficult season based on sports/casual wear. We have
completely refocused this for the second half into mens
shirts, ties and outerwear and the results have already
improved dramatically.
Home
Export sales have been depressed due to difficult markets
in Europe. However, we have continued to trade well with
the USA where the Sterling/Dollar climate has remained
stable. We have launched the Home collection in Japan to a
positive reception.
Japan
As reported previously, a favourable settlement was reached
with our former Japanese distributor.
On 1 September 1998, we took over the remaining two
important shops in Tokyo and have re-established sales to
Japan. Since our takeover, the stores have been relaunched
and sales are growing at an encouraging rate.
We continue to believe that Japan offers considerable
potential for the brand and we are in discussions with
potential new trading partners.
Current trading and outlook
The trading pattern of the first half year has continued
with widely reported evidence of reduced consumer
confidence and spending. At the middle of January sales in
our wholly owned outlets in the UK, France and Germany are
4.9% and on a like for like basis 6.5%, down on the prior
year.
The drive to reduce stocks in the first half of the year
has continued into the second half. This process will
continue to depress profits in the current year, but we are
confident that stock levels are now approaching optimum
levels. At 31 December 1998, stocks were 28% lower than
the prior year. The Group's cash flow remains positive and
borrowings have reduced since 30 September 1998. The
actions we have taken this year will, we believe, have a
positive benefit on profitability in the forthcoming year.
The programme of cost reduction commenced in the prior year
has continued. The Copenhagen sales office was closed on
31 December 1998 as a result of a review of our
Scandinavian distribution and new distributors have been
appointed for the region. Further savings have been
realised by non-replacement of leavers at our Chilcompton
factory. The consolidation of this site will also allow us
to close a small satellite warehouse by the end of the
financial year.
Overall, the economic climate for the Group in the second
half remains difficult. The actions taken by the
management team, the new product ranges introduced, the
positive effect of the reduction in the value of sterling
and reduced interest rates will, we believe, lead to a
significantly improved performance next year.
Roger Saul
Chairman and Chief Executive
For further information contact: 01749 340 500
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 6 12
months months months
to to to
30.9.98 30.9.97 31.3.98
#'000 #'000 #'000
TURNOVER 12,945 13,770 30,926
Cost of sales (7,134) (6,847) (16,175)
-------- -------- --------
GROSS PROFIT 5,811 6,923 14,751
Other operating expenses (6,144) (7,294) (14,354)
(net)
Other Operating expenses -
exceptional - - (602)
-------- -------- --------
OPERATING PROFIT/(LOSS) (333) (371) (205)
Interest payable and similar
charges (470) (351) (794)
-------- -------- --------
Profit/(loss) on ordinary
activities before taxation (803) (722) (999)
Tax on profit/(loss) on
ordinary activities (note 3) 240 242 272
-------- -------- --------
PROFIT/(LOSS) FOR THE PERIOD (563) (480) (727)
Dividends - (155) (239)
-------- -------- --------
RETAINED PROFIT/(ACCUMULATED (563) (635) (966)
LOSS)
======== ======== ========
Earnings/(loss) per share (2.70p) (2.30p) (3.51p)
Dividend per share Nil 0.75p 1.50p
pence
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30.9.98 30.9.97 31.3.98
#'000 #'000 #'000
FIXED ASSETS 6,284 5,987 6,312
CURRENT ASSETS
Stocks 7,225 9,697 7,934
Debtors 6,950 6,418 6,384
Cash 17 - 36
--------- --------- ---------
14,192 16,115 14,354
CREDITORS: Amounts falling
due within one year (11,159) (11,798) (11,200)
--------- --------- ---------
NET CURRENT ASSETS 3,033 4,317 3,154
--------- --------- ---------
TOTAL ASSETS LESS CURRENT
LIABILITIES 9,317 10,304 9,466
CREDITORS: Amounts falling
due after one year (3,707) (3,541) (3,292)
PROVISIONS FOR LIABILITIES
AND CHARGES (10) (12) (10)
--------- --------- ---------
NET ASSETS 5,600 6,751 6,164
========= ========= =========
CAPITAL AND RESERVES
Called up share capital 1,036 1,036 1,036
Reserves 4,564 5,715 5,128
--------- --------- ---------
5,600 6,751 6,164
========= ========= =========
CASHFLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30.9.98 30.9.97 31.3.98
#'000 #'000 #'000
Operating profit/(loss) (333) (371) (205)
Depreciation 494 413 881
Decrease/(increase) in 709 (1,790) (27)
stocks
Decrease/(increase) in (566) 21 372
debtors
Increase/(decrease) in 988 671 (974)
creditors
--------- --------- ---------
NET CASHFLOW FROM 1,292 (1,056) 47
OPERATIONS
Interest (470) (351) (794)
Taxation 0 0 (242)
Capital expenditure (466) (459) (779)
Dividends paid (56) (155) (239)
--------- --------- ---------
NET CASHFLOW BEFORE 300 (2,021) (2,007)
FINANCING
Financing (580) (418) (367)
--------- --------- ---------
INCREASE/(DECREASE) IN CASH
IN THE PERIOD (280) (2,439) (2,374)
========= ========= =========
RECONCILIATION OF NET
CASHFLOW TO MOVEMENT IN NET
DEBT
Decrease in cash in the (280) (2,439) (2,374)
year
Cash outflow from decrease
in debt and lease finance 580 418 367
--------- --------- ---------
300 (2,021) (2,007)
Inception of finance leases (12) (66) (518)
--------- --------- ---------
Movement in net debt 288 (2,087) (2,525)
NET DEBT, BEGINNING OF (9,637) (7,112) (7,112)
PERIOD
--------- --------- ---------
NET DEBT, END OF PERIOD (9,349) (9,199) (9,637)
========= ========= =========
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
1998.
2. Other operating expenses
Other operating expenses are reduced by #500,000 received
as compensation for loss of sales following the termination
of a distribution agreement.
3. Taxation
The corporation tax charge for the period is based on the
effective rate which it is estimated will apply for the
full year.
4. Comparative figures
The comparative figures for the year ended 31 March 1998,
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.
5. Approval and distribution
This report was approved by the Board of Directors on 27
January 1999 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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