Burberry Preliminary Results

13 May 2021

Burberry Group plc

Preliminary results for 52 weeks ended 27 March 2021

 

The next chapter: growth and acceleration

"In the last three years we have transformed our business and built a new Burberry, anchored firmly in luxury. We have revitalised our brand image, renewed our product offer and elevated our customer experience while making further progress on our ambitious social and environmental agenda. In spite of COVID-19, we achieved our objectives for the period and delivered a strong set of results in FY21, ending the year with good full-price sales growth. In this next chapter, supported by these foundations and the strength of our teams, we will accelerate our growth and deliver value creation while continuing to build a more inclusive and sustainable future."

Marco Gobbetti, Chief Executive Officer

• Recovery accelerated through the year leading to Q4 FY21 comparable store sales increasing 32% year on year and -5% compared with Q4 FY19 despite an average 16% of stores being closed. Within this, full-price sales grew 63% in the quarter (12% versus Q4 FY19) driven by Mainland China, Korea and the U.S.
• For the full year revenue decreased 10% at CER, impacted by store closures and reduced tourism, with strong recovery in the second half +8% at CER (-30% in H1 FY21): Within this, FY21 full-price comparable store sales grew +7%, accelerating through the year driven by:
  • excellent response to product, with growth in our strategic categories and in selling prices
  • increasing brand strength attracting new and younger customers
  • local customer traction, thanks to innovative selling formats during lockdowns
• Leveraged digital leadership, including opening our Social Retail store in Shenzhen Bay, driving double digit comparable sales growth across all regions
• Adjusted operating profit £396m, -8% CER, reported operating profit £521m up 176%
• Full year dividend reinstated at FY19 levels of 42.5p on the back of strong cash generation

 

Period ended	27 March	28 March	% change
£ million	2021	2020	Reported FX	CER*
Revenue	2,344	2,633	(11)	(10)
Retail comparable store sales*	(9%)	(3%)
Adjusted operating profit*	396	433	(9)	(8)
Adjusted operating profit margin *	16.9%	16.4%	+50bps	+50bps
Adjusted Diluted EPS (pence)*	67.3	78.7	(14)	(14)
Reported operating profit	521	189	176
Reported operating profit margin	22.2%	7.2%
Reported diluted EPS (pence)	92.7	29.8	211
Free cash flow**	349	66
Dividend (pence)	42.5	11.3

*See page 20 for definitions of alternative performance measures
 

Outlook**

In our next chapter we will focus on delivering growth whilst continuing to enhance the quality of our business. Taking FY20 as the base year, we expect revenue to grow at a high single digit percentage compound annual growth rate at FY21 CER in the medium term. This will be underpinned by the continued outperformance of full-price sales. We will continue to strengthen brand equity by exiting markdowns in mainline stores in FY22. This is a headwind against our comparable store sales growth amounting to a mid-single digit percentage in the full year.

In FY22 adjusted operating margin progression will be impacted by operating expense normalisation and increased investment to accelerate growth, with more meaningful margin accretion thereafter.

We are focused on and continue to invest in our sustainability and social goals by becoming carbon neutral by 2022, championing diversity and inclusion and positively impacting one million people in the communities in which we operate.  

Further guidance is included in the Appendix. 

All metrics and commentary in the Group Financial Highlights and Business and Financial Review exclude adjusting items unless stated otherwise.

The following alternative performance measures are presented in this announcement: CER, adjusted profit measures, comparable sales, free cash flow, cash conversion, adjusted EBITDA and net debt. The definition of these alternative performance measures are in the Appendix on page 20.

Certain financial data within this announcement have been rounded.

 

Enquiries

Investors and analysts		020 3367 4458
Julian Easthope	VP, Investor Relations	[email protected]
Media		020 3367 3764
Andrew Roberts	VP, Corporate Relations	[email protected]

 

• There will be a live webcast presentation today at 9.30am (UK time) for investors and analysts
• The presentation can be viewed live on the Burberry website www.burberryplc.com 
• The supporting slides and an indexed replay will be available on the website later in the day
• Burberry will issue its First Quarter Trading Update on 16 July 2021
• The AGM will be held on 14 July 2021

 

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. Burberry Group plc undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. Nothing in this announcement should be construed as a profit forecast. All persons, wherever located, should consult any additional disclosures that Burberry Group plc may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

 

Burberry is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index. ADR symbol OTC:BURBY.

BURBERRY, the Equestrian Knight Device, the Burberry Check, and the Thomas Burberry Monogram and Print are trademarks belonging to Burberry.

www.burberryplc.com

Twitter: @BurberryCorp

LinkedIn: Burberry
 

GROUP FINANCIAL HIGHLIGHTS

 

Revenue

• Revenue £2,344m -10% CER, -11% reported
• Retail comparable store sales -9% (H1: -25%; H2: +5%), returning to growth in H2 FY21

 

Adjusted profit

• Adjusted operating profit £396m, -8% CER, -9% reported
• Gross margin before adjusting items up 270bps at CER and 260bps at reported rates, benefitting from full-price and other mix effects and reduced inventory provisioning charges
• Operating expenses before adjusting items -7% at both CER and reported rates, benefitting from cost management and delivery of restructuring programmes
• Adjusted diluted EPS 67.3p, -14% at both CER and reported

 

Reported profit measures

• Operating profit £521m, up 176% after adjusting items of £125m credit (FY20: £244m charge)
• Diluted EPS 92.7p, up 211% reported

 

Cash measures

• Full year dividend declared at FY19 levels of 42.5p (FY20: 11.3p) with the progressive policy reinstated
• Free cash flow of £349m (FY20: £66m) due to strong cash management
• Cash net of overdrafts and borrowing of £919m at 27 March 2021 (28 March 2020: £587m Cash net of overdrafts amounted to £1.2bn with borrowings of £297m. The £300m revolving credit facility (RCF) is currently undrawn, and the UK Government sponsored COVID Corporate Financing Facility (CCFF) was repaid in February 2021

 

Summary income statement

 

Period ended £ million	27 March 2021	28 March 2020	% change Reported FX	% change CER
Revenue	2,344	2,633	(11)	(10)
Cost of sales*	(704)	(859)	(18)
Gross profit*	1,640	1,774	(8)
Gross margin *	70.0%	67.4%	+260bps	+270bps
Operating expenses*	(1,244)	(1,341)	(7)	(7)
Opex as a % of sales*	53.1%	51.0%
Adjusted operating profit*	396	433	(9)	(8)
Adjusted operating margin *	16.9%	16.4%	+50bps	+50bps
Adjusting operating items	125	(244)
Operating profit	521	189	176
Operating margin	22.2%	7.2%
Net finance (charge)**	(31)	(20)
Profit before taxation	490	169	190
Taxation	(114)	(47)
Attributable profit	376	122
Adjusted profit before taxation*	366	414	(12)	(11)
Adjusted diluted EPS (pence)*	67.3	78.7	(14)	(14)
Diluted EPS (pence)	92.7	29.8	211
Weighted average number of diluted ordinary shares (millions)	405.1	409.0

* Excludes adjusting items. All items below adjusting operating items on a reported basis

For detail, see Appendix.  ** Includes adjusting finance charge of £1m (FY20: £1m)         

 

 

BUSINESS AND FINANCIAL REVIEW

 

FY21 was the third year of our journey to transform Burberry and anchor our brand firmly in luxury. Against the backdrop of the COVID-19 pandemic, our goal this year was to strengthen our foundations, adapting to the environment and positioning the brand for acceleration and growth.

Despite the onset of the COVID-19 pandemic, which led to a significant reduction in operating hours and an average of 18% of our global store network closed in the financial year, we completed the objectives for the first phase of our strategy, ending FY21 with strong full-price momentum.

Supported by the strong foundations we have built, we adapted swiftly, driving performance through new product launches and inspiring communications and shifted our focus to rebounding economies and digital channels. As a result, we achieved +7% growth in full-price comparable store sales in the year, with double-digit growth across Americas, Korea and Mainland China and good traction across our core strategic categories.

In terms of brand activity, we continued to reinforce our luxury positioning through emotive campaigns and activations and adopted a highly localised approach in every market. Recent examples include the launch of our first locally produced campaign film for Lunar New Year in January. This had an exceptional response from local Chinese consumers and increased the number of new fans to our WeChat page in a single month by ~15x compared to our 2020 monthly average. In addition, in February and from the start of the new financial year in April respectively, we debuted Riccardo's first dedicated menswear and womenswear presentations for AW21. These presentations generated an extraordinary amount of conversation on Instagram, with triple- and double-digit growth compared to our SS21 Show, respectively. Similarly in March, we drove further brand heat with the launch of our global campaign to celebrate our SS21 collection which generated social coverage almost double our SS20 campaign. Continuing to build brand momentum, these activations have also attracted new and younger customers to the brand.

Our new collections have also resonated strongly, supporting double digit growth in full-price sales to both new and repeat customers. In addition, within full-price, our strategic pillars - leather goods and outerwear - have returned to mid and high single digit growth respectively for FY21. Strong performance in leather goods has been supported by our new established shapes including the Pocket, which was the focus of our first bag campaign and programme of pop-ups earlier in the year, and the Olympia, our newest shape and the focus of our upcoming bag campaign in May. Across outerwear, we have focused on elevating and diversifying our offer. For example, in January we launched Future Archive, a unique capsule reinterpreting outerwear classics from the Burberry archive. By successfully driving the performance of our strategic pillars, we have supported high single digit growth in prices - further demonstrating the strength of our brand.

In terms of distribution, we elevated the brand experience across our full-price channels and leveraged our digital resources to support both offline and online sales. Within Mainline, we continued to invest in upgrading the store portfolio with 11 new openings and 15 closures this year and developed our new store concept, which we will begin to roll out in early FY22. In addition, we increased our focus on in-person and virtual appointments to mitigate the impact of reduced traffic and drive traction with local customers. This contributed to growth in sales to local clients in most regions. We also leveraged our digital capabilities to bridge online and offline, including scaling our omnichannel journeys (e.g. virtual appointments, virtual client events) as well as pioneering social retail - launching our first social retail store in Shenzhen Bay. Our Shenzhen store has provided a testing ground for a number of innovative experiences and concepts that we plan to roll out in the coming year to drive further consumer engagement. In terms of online, we have continued to capture the recent shifts in consumer behaviour through our digital innovations to deliver double digit growth in full-price online sales across all regions, from a strong base.

Building a more sustainable future
We maintained our focus on driving positive change and building a more sustainable future through our Responsibility agenda. All of our stores in Mainland China are now carbon neutral and we are on track this year to use 100% renewable electricity and have a carbon neutral footprint across all of our operations globally. In the next 12 months, every product we make will have more than one positive environmental or social attribute, achieved by driving improvements at the sourcing and product manufacturing stage. Stretching our ambitions, we now aim to be net-zero across our own operations and extended supply chain by 2040 and will continue to set leading standards for our industry and pioneer innovative solutions to create real system change.

Embedding D&I
We also made strong progress on our commitment to build a more diverse, equitable and inclusive organisation. We rolled out our global Diversity and Inclusion strategy, with aspirational goals supported by training and global programmes designed to attract and retain diverse talent, foster an open and inclusive culture and drive education and awareness. During the year, Burberry was the first luxury company to partner with the Business Disability Forum, Investing in Ethnicity, and the Stonewall Diversity Champions Programme, and one of the first in our industry to join The Valuable 500. We also became signatories of the British Retail Consortium D&I Charter and BBC's Creative Allies initiative, working collaboratively to achieve progress across the retail and creative industries. To mark International Women's Day 2021, we continued our support for London Youth and The Prince's Trust Women Supporting Women initiative, providing resources and development opportunities for young women. Our commitment to gender equality was recognised by Burberry's inclusion in the 2021 Bloomberg Gender-Equality Index, scoring 10 percentage points more than the company average and reflected by a leading position in the latest Hampton-Alexander Review report for women in leadership in the FTSE 100 for the third consecutive year.

Responding to COVID-19
Throughout the year, the health and wellbeing of our people has been our priority. We implemented rigorous safety measures across our sites whilst providing resources to support our teams. We also further strengthened our support for the global effort to combat the outbreak of COVID-19. Burberry and the Burberry Foundation recently made donations to UNICEF's COVID-19 Vaccines Appeal, building on our efforts earlier in the year to provide funding for food charities, vaccine research and retool our trench coat factory in Castleford, Yorkshire to manufacture non-surgical gowns and source masks through our global supply chain. Following Burberry's partnership with Marcus Rashford MBE and charities supporting youth in the UK, USA and Asia, the Burberry Foundation also entered a longer term partnership with London Youth, providing young people in some of London's most deprived communities with the resources and support to build resilience against the impacts of the COVID-19 pandemic.  

UK withdrawal from the EU

We continue to adapt to the EU-UK Trade and Cooperation Agreement to ensure minimal disruption to our operations and customers. We have initiated a number of actions to mitigate duty costs including collating evidence in support of claiming preferential duty rates, streamlining product flows to minimise movements of goods between the UK and EU, and establishing a customs warehouse.

The next chapter: accelerate and grow
Having successfully navigated our transformation and established a strong foundation, we are well-positioned to embark on the next chapter of growth and acceleration. In this phase, we will leverage our unique brand equity to deliver sustainable, high-quality growth and continue to drive positive change. In terms of revenue, we will accelerate growth by focusing on five levers: i) continuing to build brand advocacy and community; ii) focusing on our core luxury categories, outerwear and leather goods; iii) driving our store performance through the roll-out of our new store concept and scaling of new, omnichannel experiences; iv) supercharging online sales by leveraging our leadership in digital; and v) increasing our focus on full-price, including significantly reducing markdown in Mainline by the end of FY22. This acceleration will support our profitability through increased full-price and digital penetration, improved sales density and continued tight cost control. As a result, our ambition in the medium-term is to achieve high-single digit compound revenue growth at FY21 CER on FY20 base- with overperformance in full-price - and meaningful operating margin accretion.

Throughout, we will be relentless in our focus on our sustainability and social priorities. We are committed to continuing to build not only a financially stronger Burberry but also a better company. We will fuel the creativity of our colleagues by championing diversity, equality and inclusion and supporting their wellbeing. We will empower young people in our communities, providing more of them with the skills, confidence and opportunities to succeed. Lastly, we will create a more sustainable future for luxury by further reducing our environmental impacts and helping transform our industry.

 

 

 

Financial performance​

• Performance in the year was driven by full-price sales offset by both a planned reduction in markdown activity as we further elevate the brand, and from outlets that were impacted by tourist flows. With no impact from space, retail sales declined 9% at both CER and reported exchange rates. Wholesale declined 17% at CER and reported exchange rates in the year with a good recovery in the second half. In total, the group saw revenue down 10% at CER and 11% at reported exchange rates to £2,344m (FY20 £2,633m)
• Group adjusted operating profit fell 8% at CER, with a strong recovery in H2 rising by 48% following the 71% decline in H1. Gross margin increased in the year by 270bps CER (260bps reported), benefitting from full-price and other mix effects and reduced charges for inventory provisioning. Adjusted operating expenses fell by 7% at CER, with strong cost management and delivery of the restructuring programmes. This excludes £54m of rent concessions negotiated during the COVID-19 crisis and £9m of government grants. During the year, we paid the UK business rates in full and did not take advantage of the UK Government Coronavirus Job Retention Scheme. Reported operating profit increased 176% including an adjusting item credit of £125m. FX was a minor headwind in the year of £3m
• We generated free cash flow in the year of £349m, significantly above the prior year level of £66m due to lower lease payments, reduced capex and tax payments as well as tight management of working capital. Inventory in particular was well controlled, with gross inventory 16% below last year and 7% down from FY19 levels, benefitting from improved sell-through. Capital expenditure reduced to £115m (FY20 £149m) with some projects impacted by COVID-19

 

 

 

 

Revenue analysis

 

Revenue by channel

 

Period ended	27 March	28 March		% change
£ million	2021	2020		Reported FX	CER
Retail	1,910	2,110		(9)	(9)
Retail comparable store sales growth	(9%)	(3%)
Wholesale	396	476		(17)	(17)
Licensing	38	47		(19)	(20)
Revenue	2,344	2,633		(11)	(10)

 

Retail

FY21	Q1	Q2	Q3	Q4	FY	Q4 FY21 v Q4 FY19*
Comparable store sales growth	(45%)	(6%)	(9%)	32%	(9%)	(5%)
Comparable full-price sales growth	(38%)	(1%)	9%	63%	7%	12%

*Q4 FY21 comparable store sales growth compared with Q4 FY19

 

• Retail sales fell 9% at constant and reported exchange rates
• Comparable store sales declined 9% (H1: -25%; H2: +5%). Underlying performance was strong with full-price sales growth of 7% offset by store closures and a significant reduction in tourist traffic due to COVID-19, together with the planned reduction in markdown activity in the second half of the year. Overall, markdowns had a low single digit percentage adverse impact on FY21 sales growth
• Comparable store sales grew 32% in the fourth quarter (-5% against Q4 FY19) as we began to anniversary the impact from the pandemic and with a sequential acceleration in sales in Asia Pacific and Americas whilst EMEIA remained impacted by lockdowns
• Nil impact from space on FY21 revenue

 

Comparable store sales by region:

FY21	Q1	Q2	Q3	Q4	FY	Q4 FY21 v Q4 FY19
Group	(45%)	(6%)	(9%)	32%	(9%)	(5%)
Asia Pacific	(10%)	10%	11%	75%	18%	17%
EMEIA	(74%)	(39%)	(37%)	(26%)	(44%)	(44%)
Americas	(70%)	21%	(8%)	40%	(9%)	15%

 

Asia Pacific grew by 18% year on year

• Asia Pacific saw the best regional performance in the year, led by Mainland China and Korea
• Mainland China saw strong double digit growth with comparable store sales accelerating in the fourth quarter to 53% against FY19 driven by a successful Lunar New Year campaign
• Korea also delivered strong double digit percentage growth with a significant improvement in comparable store sales in the last quarter of the year
• South Asia Pacific (SAP) declined by a double digit percentage, affected by limited tourist traffic and airport store closures
• Japan also fell, impacted by a lack of international travel

 

EMEIA fell by 44% year on year

• EMEIA has been especially impacted by travel trends and store closures
• Continental Europe saw a decline broadly in line with the regional average; however, local spend returned to growth from the second quarter 
• The UK remained challenged with London performance weak given high tourist exposure
• Middle East returned to growth in the second half of the year driven by strong local demand and improved tourist flows

                                                                                                                                     

Americas declined by 9% year on year

• Americas saw a robust performance in full-price sales from Q2 FY21, increasing 17% in the year
• Within this, the US was particularly strong driven by attracting new younger customers to the brand

 

Digital performed well in the year with double digit percentage growth driven by the Americas and Mainland China.

 

By product

• Full-price sales grew across all product categories in FY21 and in the fourth quarter against Q4 FY19
• Product performance was impacted by the pandemic with a shift towards casualisation and evergreen items
• Outerwear was driven by strong performance in Coats and Jackets, Quilts and Downs with exceptional performance in Mainland China and Korea 
• Within Ready-to-wear, Tops and Bottoms continued to outperform with a strong performance in Shirts and Jersey within Men's and Knitwear within Women's
• Leather goods remained a key focus in FY21 with the new bag pillars performing well. The new shapes continue to account for more than 60% of our women's leather bag sales
• Digital full-price sales saw high double digit percentage growth across all categories with a particularly strong performance in Accessories driven by leather goods and shoes

 

Store footprint

The transformation of our distribution continued as we addressed high priority programmes:

• In FY21 we opened 17 stores and closed 23 stores
• Key openings included 13 in Mainland China including our first Social Retail store in Shenzhen Bay
• Cumulative 34 stores closed to date of the 38 planned closures from the non-strategic store rationalisation programme
• A cumulative 85 stores are now new or refurbished and aligned to our new creative vision, an increase of 21 in the year
• In support of our goal to be net-zero by 2040, we finance or refinance buildings that have achieved one of the following certifications:

o Leadership in Energy and Environmental Design (LEED): Platinum or Gold level

o Building Research Establishment Environmental Assessment Method (BREEAM): Excellent or Outstanding level

 

Wholesale

Wholesale revenue declined 17% at CER and reported exchange rates with a return to growth in the second half of the year with sales up 8% at reported exchange rates.

 

Licensing

Licensing revenue fell 19% at reported exchange rates due to lower sales from the COVID-19 fallout.

 

 

 

Operating profit analysis

 

Adjusted operating profit

 

Period ended   £ million	27 March 2021	28 March 2020	% change
			Reported FX	CER
Revenue	2,344	2,633	(11)	(10)
Cost of sales*	(704)	(859)	(18)
Gross profit*	1,640	1,774	(8)
Gross margin %*	70.0%	67.4%	+260bps	+270bps
Operating expenses*	(1,244)	(1,341)	(7)	(7)
Opex as a % of sales*	53.1%	51.0%
Adjusted operating profit*	396	433	(9)	(8)
Adjusted operating margin %*	16.9%	16.4%	+50bps	+50bps

*Excludes adjusting items

 

Adjusted operating profit declined 9% and margin increased by 50bps at reported exchange rates.

• Gross margin increased 270bps at CER (260bps reported). Business performance accounted for around two thirds of the gross margin improvement benefitting from full-price, channel and regional (predominantly Mainland China) mix. The gross margin benefited from COVID provisions taken in the PY by around 80 bps
• Adjusted operating expenses fell by 7% against last year, benefitting from strong cost management and delivery of the restructuring programmes. The 2017 cost savings programme has delivered savings of £150m since inception including an incremental £25m in FY21
• In July 2020  we announced a cost reduction programme to deliver the planned £55m savings with £45m of associated costs. This programme remains on track and we achieved the targeted £35m of savings in FY21 with an associated cost of £22m that was presented as an adjusting item. We expect the remaining £20m benefit from the cost reduction programme will be achieved in FY22, with further costs of £23m to be incurred

 

Adjusted operating profit amounted to £396m including a £3m FX headwind in FY21.

 

Adjusting items^*

Adjusting items were a credit of £124m (FY20: £245m charge).

Adjusting items* Period ended £ million	27 March 2021	28 March 2020
The impact of COVID-19
Inventory provisions	22	(68)
Rent concessions	54	-
Store impairments	47	(157)
Government grants	9	-
Receivable impairments	5	(11)
Assets under the course of construction impairment	-	(10)
Related other sundry items	-	5
COVID-19 adjusting items**	137	(241)
Restructuring costs	(30)	(10)
Profit on sale of property	18	-
BME deferred consideration income	-	2
Disposal of beauty business	-	5
Adjusting operating items	125	(244)
Adjusting financing items	(1)	(1)
Adjusting items	124	(245)

*For more details see note 7 of the Financial Statements

** COVID-19 adjusting item includes a £22m credit (FY20: £68m charge) that has been recognised through COGS relating to inventory provisions

 

The major adjusting items are as follows:

 

• Impact of the COVID-19 pandemic: the majority of adjusting items relate to rent concessions across our retail network and impairment reversals to the carrying value of stores and inventory due to positive trading in FY21. In addition, COVID-19 related government grants were also treated as an adjusting item
• Restructuring costs: £22m related to the organisational changes announced in July 2020 and the final charge of £8m relating to the cost-efficiency programme announced in 2017
• Profit on sale of property: relates to the sale of a property in France

 

Adjusted profit before tax*

 

After an adjusted net finance charge of £30m (FY20 £19m), adjusted profit before tax was £366m (FY20 £414m).

 

*For detail on adjusting items see note 7 of the Financial Statements

 

Taxation*

 

The effective tax rate on adjusted profit increased to 25.4% (FY20: 22.3%). This was higher than normal due to COVID-19 impacting the geographical shift in profits towards higher tax jurisdictions. The reported tax rate on FY21 profit before taxation was 23.3% (FY20: 27.9%).

 

* For detail see note 9 of the Financial Statements

 

Cash flow

 

Represented statement of cash flows

 

The following table is a representation of the cash flows, excluding the impact of adjusting items, to highlight the underlying movements.

 

Period ended £ million	27 March 2021	28 March 2020
Adjusted operating profit	396	433
Depreciation and amortisation	277	331
Working capital	(25)	(66)
Other	29	(73)
Cash inflow from operations	677	625
Payment of lease principal and related cash flows	(155)	(244)
Capital expenditure	(115)	(149)
Proceeds from disposal of non-current assets	27	3
Interest	(27)	(19)
Tax	(58)	(150)
Free cash flow	349	66

 

Free cash flow was £349m (FY20 of £66m) and cash conversion was 111% (2020: 52%) reflecting strong cash discipline. We had the following key flows:

• Working capital saw a £25m outflow. Within this, inventories reduced 16% in gross terms due to disciplined inventory control, generating an inflow of £21m in the year (FY20 inflow of £27m), with significantly lower payables outflow more than offsetting higher receivables outflow compared to prior year
• Lease related payments fell £89m including benefit of £54m of COVID-19 related rent concessions
• Capital expenditure reduced to £115m (2020: £149m) as projects were impacted by the pandemic
• Tax paid reduced to £58m against the prior year in which payments were elevated mostly due to the accelerated collection by HMRC in the UK

 

Cash net of overdrafts at 27 March 2021 was £1.2bn (28 March 2020: £0.9bn). We repaid the RCF in June 2020 and in September issued a £0.3bn Sustainability Bond after obtaining a public investment grade credit rating. For short term security, we borrowed £0.3bn under the Government backed CCFF during the year, repaying this early, in February 2021.

Our net debt^* including reported lease liabilities was £101m (28 March 2020: £538m). Net Debt / adjusted EBITDA was 0.1x on a rolling 12 months period (28 March 2020 0.7x), significantly below our target range of 0.5x to 1.0x.

Progressive dividend policy reinstated with the full year dividend declared at FY19 levels of 42.5p.

*For a definition of net debt see page 21.   

 

Period ended £ million	27 March 2021	28 March 2020
Adjusted EBITDA - rolling 12 months	673	764
Cash net of overdrafts	(1,216)	(887)
RCF drawn	-	300
Bond	297	-
Lease debt	1,020	1,125
Net Debt	101	538
Net Debt/Adjusted EBITDA	0.1x	0.7x

 

 

 

APPENDIX

 

Detailed guidance for FY22

Item	Financial impact
Markdown policy	We will be exiting markdowns in mainline stores in FY22. This will lead to a headwind against our comparable store sales of mid-single digits in the full year with Q1 FY21 comp impacted by HSD
Wholesale revenue	H1 wholesale to increase by around 50%
Impact of retail space on revenues	We expect space to be broadly neutral in the year
Tax	We expect the adjusted tax rate to be around 22%
Capex	Expected to be in the range £180m to £190m - increasing due to investment in store refurbishments, digital and IT
Currency	Headwind on revenue of £96m and £34m on adjusted operating profit at 30 April spot rates
Dividend	Resumption of progressive dividend policy
Calendar	Please note that FY22 is a 53 week year with an additional week in Q4

Note : guidance based on CER at FY21 rates

 

 

Retail/wholesale revenue by destination*
Period ended	27 March	28 March		% change
£ million	2021	2020		Reported FX	CER
Asia Pacific (94% retail)*	1,203	1,041		16	16
EMEIA (59% retail)*	628	960		(35)	(35)
Americas (86% retail)*	475	585		(19)	(15)
Total	2,306	2,586		(11)	(10)

* Mix based on FY21

 

Retail/wholesale revenue by product division
Period ended	27 March	28 March		% change
£ million	2021	2020		Reported FX	CER
Accessories	841	948		(11)	(11)
Women's	653	796		(18)	(18)
Men's	668	715		(7)	(6)
Children's & other	144	127		14	15
Total	2,306	2,586		(11)	(10)

 

 

Store portfolio
	Directly-operated stores
	Stores	Concessions	Outlets	Total	Franchise stores
At 28 March 2020	218	149	54	421	44
Additions	11	1	5	17	-
Closures	(15)	(5)	(3)	(23)	-
At 27 March 2021	214	145	56	415	44
Store portfolio by region*
	Directly-operated stores
At 27 March 2021	Stores	Concessions	Outlets	Total	Franchise stores
Asia Pacific	97	90	22	209	7
EMEIA	56	46	18	120	37
Americas	61	9	16	86	-
Total	214	145	56	415	44

*Excludes the impact of pop up stores

 

 

Adjusted operating profit* Period ended £ Millions	27 March 2021	28 March 2020	% change Reported FX	% change CER
Retail/wholesale	361	390	(7)	(6)
Licensing	35	43	(20)	(21)
Adjusted operating profit	396	433	(9)	(8)
Adjusted operating margin	16.9%	16.4%	+50bps	+50bps

 

*For additional detail on adjusting items see note 7 of the Financial Statements

 

Exchange rates
	Spot rates	Average effective exchange rates
£1=	30 April 2021		FY21	FY20
Euro	1.15		1.12	1.14
US Dollar	1.39		1.30	1.27
Chinese Yuan Renminbi	9.03		8.85	8.88
Hong Kong Dollar	10.82		10.08	9.89
Korean Won	1,545		1,514	1,504

 

Profit before tax reconciliation
Period ended   £ million	27 March 2021	28 March 2020	% change Reported FX	% change CER
Adjusted profit before tax	366	414	(12)	(11)
Adjusting items*
COVID-19 related items	137	(241)
Restructuring costs	(30)	(10)
Profit on sale of property	18	-
BME deferred consideration liability	-	2
Disposal of Beauty operations	-	5
Adjusting financing items	(1)	(1)
Profit before tax	490	169	190

 

 

 

Alternative performance measures

Alternative performance measures (APMs) are non-GAAP measures. The Board uses the following APMs to describe the Group's financial performance and for internal budgeting, performance monitoring, management remuneration target setting and for external reporting purposes.

 

APM	Description and purpose	GAAP measure reconciled to
Constant Exchange Rates (CER)	This measure removes the effect of changes in exchange rates compared to the prior period. It incorporates both the impact of the movement in exchange rates on the translation of overseas subsidiaries' results and also on foreign currency procurement and sales through the Group's UK supply chain.	Results at reported rates
Comparable sales	The year-on-year change in sales from stores trading over equivalent time periods and measured at constant foreign exchange rates. It also includes online sales. This measure is used to strip out the impact of permanent store openings and closings, or those closures relating to refurbishments, allowing a comparison of equivalent store performance against the prior period. The measurement of comparable sales has not excluded stores temporarily closed as a result of the COVID-19 outbreak   Full-price sales: Net sales of Group's directly operated mainline comparable stores excluding Markdown sales.	Retail Revenue:   Period ended YoY% 27 March 2021 28 March 2020 Comparable sales* (9%)* (3%) Change in space - (1%) FX - 1% Retail revenue (9%) (3%) *Includes full-price comp +7%
Q4 FY21 vs Q4 FY19 comparable sales	The change in sales over two years measured at constant foreign exchange rates. It also includes online sales. The measurement of comparable sales has not excluded stores temporarily closed as a result of the COVID-19 outbreak. This measure reflects the two year aggregation of the growth rates.	Retail Revenue:   % change Q4 FY21 vs Q4 FY19 Reported growth (2%) Comparable sales (5%) Change in space 5% CER retail 0% FX (2%)
Adjusted Profit	Adjusted profit measures are presented to provide additional consideration of the underlying performance of the Group's ongoing business. These measures remove the impact of those items which should be excluded to provide a consistent and comparable view of performance.	Reported Profit: A reconciliation of reported profit before tax to adjusted profit before tax and the Group's accounting policy for adjusted profit before tax are set out in the financial statements.

 

Free Cash Flow	Free cash flow is defined as net cash generated from operating activities less capital expenditure plus cash inflows from disposal of fixed assets and including cash outflows for lease principal payments and other lease related items.	Net cash generated from operating activities:   Period ended £m 27 March 2021 28 March 2020 Net cash generated from operating activities 592 456 Capex (115) (149) Lease principal and related cash flows (155) (244) Proceeds from disposal of non-current assets 27 3 Free cash flow 349 66
Cash Conversion	Cash conversion is defined as free cash flow pre-tax/adjusted profit before tax. It provides a measure of the Group's effectiveness in converting its profit into cash.	Net cash generated from operating activities:   Period ended £m 27 March 2021 28 March 2020 Free cash flow 349 66 Tax paid 58 150 Free cash flow before tax 407 216 Adjusted profit before tax 366 414 Cash conversion 111% 52%
Net Debt	Net debt is defined as the lease liability recognised on the balance sheet plus borrowings less cash net of overdrafts.	Cash net of overdrafts:   Period ended £m 27 March 2021 28 March 2020 Cash net of overdrafts 1,216 887 Lease liability (1,020) (1,125) Borrowings (297) (300) Net debt (101) (538)
Adjusted EBITDA	Adjusted EBITDA is defined as operating profit, excluding adjusting operating items, depreciation of property, plant and equipment, depreciation of right of use assets and amortisation of intangible assets. Any depreciation or amortisation included in adjusting operating items are not double-counted. Adjusted EBITDA is shown for the calculation of Net Debt/EBITDA for our gearing ratios.	Reconciliation from operating profit to adjusted EBITDA:   Period ended £m 27 March 2021 28 March 2020 Operating profit 521 189 Adjusted operating items (125) 244 Amortisation of intangible assets 33 26 Depreciation of property, plant and equipment 72 84 Depreciation of right-of-use assets 172 221 Adjusted EBITDA 673 764