Mulberry Group PLC - Final Results
August 26 1999 - 3:33AM
UK Regulatory
RNS No 5477b
MULBERRY GROUP PLC
26 August 1999
Mulberry Group plc
Preliminary Results for the Year to 31 March 1999
HIGHLIGHTS
Major license and distribution deal in Japan with
world fibre leader Toray - should see sales in Japan of
#50m in 5 years.
Key partnership agreement with Kravet US Home
furnishing giant - #1.5million consideration and world-
wide licence income.
Loss before tax #(1.8m) - (1998 1.0m) in line with
market expectations.
Overheads, stock and borrowings reduced.
Worldwide website Mulberry E-Commerce trial goes
live.
New handbag collection "Technique" successful launch
for Spring/Summer 2000.
Commenting on the results, Mulberry Chairman, Roger Saul,
said:
"Our results are in line with market expectations despite
difficult trading conditions which persisted throughout
last year. During the year the Company has strengthened
its management team in order to implement the changes
required in order to make a rapid return to profit.
The changes include licensing key product areas in order
to simplify the business and investing in design in order
to update our core accessory product offer.
By far the most significant steps we have taken are the
two recent deals that we have struck with Kravet in the
US and Toray in Japan - both leaders in their own
markets. The Toray Agreement in particular endorses our
unwavering belief that Japan will continue to be the
major market for Luxury Brands for some time to come.
Finally we believe that E-Commerce represents a very
exciting sales opportunity for key product areas. Luxury
goods brands are not usually associated with selling
through the internet. However, early indications are
that a carefully identified and priced selection of our
accessories will increase the availability of the
Mulberry brand to new customers."
For further information:
Roger Saul, Chairman and Designer
Mulberry Group plc 01749 340500
Godfrey Davis, Finance Director
Mulberry Group plc
Alex Mackey
GCI Focus 0171 600 1392
CHAIRMAN'S STATEMENT
The last two years have been one of the most difficult
periods of change that Mulberry has had to face. We have
needed to move from a UK design, manufacture and export
base to a world-wide sourcing and distribution operation.
Clearly this has meant substantial changes to our modus
operandi; management and staff have had to embrace change
on a major scale.
We have invested strongly in both design and marketing
with the result that the Mulberry collection has been
updated without losing its lifestyle and quality
attributes. However during this process we have had to
accept that it is not possible for us to finance the
development of all product areas ourselves. We have
concentrated on finding major world-wide partners to help
us develop Mulberry into a truly global luxury brand. To
this end we have recently secured two major partnership
agreements with Toray in Japan and Kravet in the USA.
Trading continues to be challenging with little change in
the UK, European and Far East markets. Sterling
continues to be strong, affecting our export markets and
the buying power of tourists in the important London
market. Despite this our Bond Street flagship store
continues to be highly profitable with sales of #3
million last year.
These adverse trading conditions resulted in an operating
loss for the year to 31 March 1999 of #0.9m (1998:
#0.2m); a loss before tax of #1.8m (1998: #1.0m) and
lower sales of #27.4m (1998: #30.9m) . These results
were in line with market expectations.
Overheads have been cut by #1 m.
Stocks have been reduced during the year by #1.5 m.
Cashflow has been improved by the concerted action to
reduce stocks and as a result borrowings reduced by #0.8 m.
OPERATING OVERVIEW
In previous statements I have referred to a number of
initiatives which we have undertaken. We have achieved a
great deal already and expect a progressive improvement
in our operating performance from this point as the
benefits flow through.
FOCUS ON ACCESSORIES
Our core activity remains our accessory collection and
innovative product development remains the very lifeblood
of the Mulberry Brand. To further reinforce this
division we have invested in design and marketing during
the year with strong new product lines reaching our shops
in Autumn 1999 and with further introductions in Spring
2000 supported by distinctive and focused advertising
campaigns.
We have successfully halved the number of products
offered whilst enhancing the attractiveness of the
product range, introducing exciting new products such as
Flight and Team Luggage and our new hi-tech Business
Accessories collection.
For Spring/Summer 2000 we introduce a new contemporary
handbag collection "Technique" which has already had a
very positive response from customers around the world.
SIMPLIFICATION OF THE BUSINESS
Our goal continues to be the simplification of our
business. This has been, in a large part, achieved
through the rationalisation of our existing product
ranges and the recently signed agreement to licence our
Home furnishings collection.
We have been very successful in developing our Home
furnishings business and it has become a recognised
market leader in its sector. However, it is not our core
business. We concluded that there was substantial scope
for growth, especially in the US market which is
principally driven through wholesalers and interior
designers. As a result, we sought to identify the
optimum specialist partner in this field and have signed
a world-wide licence agreement with Kravet, the leading
home furnishings specialist in the USA. This agreement
will take effect from 1 September 1999.
As part of the agreement, Kravet will invest in expanding
the product range to drive a substantial increase in
sales. Kravet currently has showrooms in 23 major US and
Canadian cities and an experienced and dedicated sales
force throughout the USA.
Kravet will combine Mulberry's UK and Europe sales
operation with their own to build on the success of both
brands. Kravet will pay a consideration of #1.5m to
Mulberry followed by royalties based on sales. It is
envisaged that sales of these products, on which
royalties will be paid, will increase by 400% over the
next 5 years.
This transaction is a major step in the simplification of
our business and the competition from interested parties
is testament to the success of our team in this area.
WORLD-WIDE SOURCING
We have an outstanding manufacturing facility and
workforce in Somerset which achieves industry leading
standards of materials utilisation due to our investment
in CADCAM systems for leather cutting. While this
facility is competitive for low labour content high
material value products, it cannot compete on high labour
content products. This has formed the basis for our
production outsourcing programme. We have outsourced
approximately 50% of our manufacturing to Southern Europe
and the Far East where they are able to meet our
demanding quality standards. While these facilities have
been developed over the last 2 years, the real benefits
in margin will be achieved progressively over the next 2
years.
STRENGTHEN THE OPERATIONAL MANAGEMENT
Over the last year we have invested in developing our
operational management team at the level below the Group
board. We have successfully changed the operational
management of our own shops and have strong new team
members in marketing, merchandise selection and finance.
We are committed to the process of ensuring management
succession.
At main Board level, Godfrey Davis, who has taken the
leading role in negotiating the transactions with Kravet
and Toray, will take up the position of Deputy Chairman
in an executive capacity and Guy Rutherford, who joined
the Group in January 1999 will be appointed Group Finance
Director, with effect from 30 September 1999.
WORLD-WIDE WEBSITE
Over the last 12 months we have been working on our plans
for E-Commerce. Our first phase web-site went live at
Easter 1999 (www.mulberry-england.co.uk). In the
meantime we have addressed our international pricing
policy which means that currency fluctuations provided,
Mulberry is now priced on a comparable basis world-wide -
something that many other Brands are not. We plan
further developments in the New Year.
MAJOR MARKET DEVELOPMENT IN JAPAN
We began the re-organisation of our Japanese operation
last year, having taken over control of our Tokyo stores
following the collapse of our local partner. Strongly
believing in the Japanese market, we doubled the size of
our Tokyo "flagship" store to include our home interiors
collection. As a result, the Japanese flagship store
sales have increased by approximately 50%, despite the
worst recession in Japan since the war, which saw retail
sales fall 11% in the clothing industry.
This continued commitment to Japan enabled us to enter
into successful negotiations with Toray Industries to
whom we have granted a master license to manufacture and
distribute 23 different categories of Mulberry product
throughout Japan and an exclusive import licence for
products manufactured by Mulberry.
Toray forecast sales in Japan of licensed and imported
Mulberry product totaling approximately #50 million over
the first 5 years.
Toray will make an investment in the Group of #250,000 in
1% redeemable preference shares to show their commitment.
The authorisation for this share issue will be included
in the agenda for the Annual General Meeting.
Toray are the world's largest textile manufacturer and
are another world class partner for Mulberry.
DIVIDEND
As announced on 13 April, your Board has decided not to
recommend a final dividend, due to the continued adverse
trading conditions.
OUTLOOK
As a result of our strategy of simplification, the focus
on our core activities and the future benefits of the
transactions outlined above, we believe that, although
trading conditions remain challenging and forward orders
are currently unpredictable, Mulberry Group is well
positioned for the future.
Roger Saul, Chairman and Chief Executive
26 August 1999
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 March 1999
1999 1998
#'000 #'000
TURNOVER 27,393 30,926
Cost of sales (14,974) (16,175)
-------- --------
- -
GROSS PROFIT 12,419 14,751
Other operating expenses (net) (13,291) (14,354)
Other operating expenses - exceptional
re-organisation costs - (602)
-------- --------
- -
OPERATING LOSS (872) (205)
Finance charges (860) (794)
Group share of loss of related (47) -
companies
-------- --------
- -
LOSS ON ORDINARY ACTIVITIES BEFORE (1,779) (999)
TAXATION
Tax on loss on ordinary activities (8) 272
-------- --------
- -
LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION, BEING LOSS FOR THE FINANCIAL (1,787) (727)
YEAR
Dividends paid and proposed on equity - (239)
shares
-------- --------
- -
LOSS FOR THE YEAR (1,787) (966)
-------- --------
- -
LOSS PER ORDINARY SHARE (8.57p) (3.51p)
-------- --------
- -
CONSOLIDATED BALANCE SHEET
31 March 1999
1999 1998
#'000 #'000
FIXED ASSETS
Tangible assets 6,124 6,195
Investments 44 117
--------- ---------
6,168 6,312
CURRENT ASSETS --------- ---------
Stocks 6,396 7,934
Debtors 4,856 6,384
Cash at bank - 36
--------- ---------
11,252 14,354
CREDITORS: Amounts falling due
within one year (10,986) (11,200)
--------- ---------
NET CURRENT ASSETS 266 3,154
--------- ---------
TOTAL ASSETS LESS CURRENT 6,434 9,466
LIABILITIES
CREDITORS: Amounts falling due
after more than one year (2,050) (3,292)
PROVISIONS FOR LIABILITIES AND - (10)
CHARGES
--------- ---------
NET ASSETS 4,384 6,164
--------- ---------
CAPITAL AND RESERVES
Called-up share capital 1,049 1,036
Share premium account 3,245 3,257
Revaluation reserve 297 328
Capital redemption reserve 154 154
Profit and loss account (361) 1,389
--------- ---------
EQUITY SHAREHOLDERS' FUNDS 4,384 6,164
--------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 1999
1999 1998
#'000 #'000
NET CASH INFLOW FROM OPERATING 2,315 47
ACTIVITIES
Returns on investments and servicing of (843) (794)
finance
Taxation 233 (242)
Capital expenditure and financial (806) (779)
investment
Equity dividends paid (55) (239)
--------- ---------
Cash inflow (outflow) before financing 844 (2,007)
Financing (429) (367)
--------- ---------
INCREASE (DECREASE) IN CASH IN THE YEAR 415 (2,374)
--------- ---------
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
1999 1998
#'000 #'000
Increase (decrease) in cash in the year 415 (2,374)
Cash outflow from decrease in debt and
lease financing 429 367
--------- ---------
844 (2,007)
Inception of finance leases (54) (518)
--------- ---------
Movement in net debt 790 (2,525)
NET DEBT, BEGINNING OF YEAR (9,637) (7,112)
--------- ---------
NET DEBT, END OF YEAR (8,847) (9,637)
--------- ---------
CASH FLOW INFORMATION
Reconciliation of operating loss to net cash inflow from
operating activities
1999 1998
#'000 #'000
Operating loss (872) (205)
Depreciation charge 879 837
Loss on sale of tangible fixed assets 4 44
Decrease (Increase) in stocks 1,538 (27)
Decrease in debtors 1,256 372
Decrease in creditors (417) (775)
Effect of foreign exchange rate changes (73) (199)
--------- ---------
Net cash inflow from operating 2,315 47
activities
--------- ---------
Consolidated statement of total recognised gains and
losses
For the year ended 31 March 1999
1999 1998
#'000 #'000
Loss for the financial year (1,787) (727)
Currency translation differences on (93) (247)
foreign currency net investments
-------- --------
- -
Total recognised gains and losses in (1,880) (974)
the year
-------- --------
- -
NOTES
1. The financial information set out above does not
constitute the Company's statutory accounts. Statutory
accounts for the year ended 31 March 1998 have been filed
with the Registrar of Companies. The statutory accounts
for the year ended 31 March 1999 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 1998 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
1998.
3. Earnings per share are calculated on 20,849,442
(1998:20,772,941) ordinary shares being the weighted
average number of shares in issue during the year.
4. 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.
5. The Annual General Meeting will be held at Mulberry
Group plc's registered office, Kilver Court, Shepton
Mallet, Bath, BA4 5NF on 1 October 1999.
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 Limited, 12-20 Camomile Street, London, EC3A
7NN.
END
FR AVOWKKUKWUAR
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