24th May 2005 07:03
Burberry Group PLC24 May 2005 PART 2 33 Post-retirement benefits (a) Accounting for pension costs Burberry Group provides post-retirement arrangements for its employees in the UKand its overseas operations which are both defined benefit and definedcontribution in nature. Where arrangements are funded, assets are held inindependently administered trusts. The pension costs charged to the profit andloss account in respect of the main plans were: Year to 31 March ------------ 2005 2004 (Restated) £m £m-------------------------------------- ------- -------Defined benefit schemes GUS defined benefit pension scheme UK 0.9 0.9Supplemental executive retirement plan US* 0.3 0.4Defined contribution schemes GUS money purchase pension plan UK 0.7 0.6Burberry money purchase plan US 0.6 0.5Other Burberry pension schemes 0.1 0.2-------------------------------------- ------- ------- Total pension costs 2.6 2.6-------------------------------------- ------- ------- \* The plans in the US are classified as defined benefit schemes under FRS 17because their exact cost cannot be quantified as the funds are subject tonotional indexation according to specified investment return indices. 33 Post-retirement benefits (continued) (a) Accounting for pension costs (continued) Movements in pensions obligations during the year were as follows:---------------------------- ------- ------- ------ ------- GUS defined Supplemental Other Total benefit executive pension scheme retirement plan UK US £m £m £m £m---------------------------- ------- ------- ------ -------As at 1 April 2004 as previouslyreported - 0.7 0.2 0.9 Impact of adopting FRS17 (see note 3) 1.1 - - 1.1---------------------------- ------- ------- ------ -------As at 1 April 2004 asrestated 1.1 0.7 0.2 2.0Effect of foreignexchange rate changes - (0.1) - (0.1)Charged to the profit andloss account 0.9 0.3 - 1.2Other finance income (0.2) - - (0.2)Contributions paid duringthe year (2.7) - - (2.7)Actuarial gain 1.5 - - 1.5Other movements 0.1 - - 0.1---------------------------- ------- ------- ------ -------As at 31 March 2005 0.7 0.9 0.2 1.8---------------------------- ------- ------- ------ ------- (b) Defined benefit schemes GUS defined benefit scheme UK Burberry Group companies participate in the GUS defined benefit pension scheme,which offers defined benefits based on service and salary at retirement.Currently, Burberry Group is not permitting new entrants to the GUS definedbenefit pension scheme. The GUS scheme has rules which specify the benefits to be paid and is financedaccordingly, with assets being held in independently administered funds. A fullactuarial valuation of the GUS scheme is carried out every three years withinterim reviews in the intervening years. A full actuarial valuation of thescheme was carried out at 31 March 2004 by independent qualified actuaries,Watson Wyatt LLP, using the projected unit method. As a result of the 31 March 2004 valuation it has become possible to separatelyidentify the underlying assets and liabilities which relate to the BurberryGroup and so FRS 17 "Retirement Benefits" has been adopted during the year withcomparative data restated accordingly, see note 3. As at 31 March 2005 there were 64 (2004: 80) Burberry Group employees in thescheme and Burberry Group contributions represented approximately 7.7% (2004:7.2%) of total employer contributions to the scheme. Burberry has beencontributing 17.9% (2004: 17.9%) in respect of members in the main benefitsection. During the year to 31 March 2005 GUS made a special contribution to the schemeof £26.2m (2004: £30.0m) in order to fund the shortfall disclosed by the interimvaluation on the ongoing actuarial assumptions used for funding purposes.Burberry Group's share of this contribution is estimated at £2.0m (2004: £2.3m). The deficit for the GUS group defined benefit pension scheme as a whole, on thebasis set out below, was approximately £6.6m as at 31 March 2005 (2004: £47.9m),after allowing for the £26m (2004: £30m) special contribution paid in March 2005and before allowing for deferred tax. 33 Post-retirement benefits (continued) (b) Defined benefit schemes (continued) The principal actuarial assumptions used in the valuation of the Burberry Groupportion of the GUS group defined benefit pension scheme are the same as theseused for the whole GUS group defined benefit pension scheme and are: As at 31 March ----------------- 2005 2004 2003------------------------------------ ------- ------- -------Rate of inflation 2.9% 2.8% 2.5%Rate of salary increases 4.7% 4.6% 4.3%Rate of increase for pensions in payment and deferredpensions 2.9% 2.8% 2.5%Discount rate 5.4% 5.5% 5.5%------------------------------------ ------- ------- ------- (i) Market value of scheme's assets The assets of the Burberry Group's portion of the GUS defined benefit scheme andthe expected rates of return are summarised as follows: As at 31 March------------------------ ----------------------------- Fair value Expected Fair value Expected Fair value Expected 2005 long 2004 long 2003 long £m term rate £m term rate £m term rate of return of return of return 2005 2004 2003 %pa %pa %pa------------------------ ------- ------- ------- ------- ------ -------Market value of schemes'assets:Equities 22.7 8.0% 19.5 8.0% 13.4 8.5%Fixed interestsecurities 10.4 5.1% 8.8 5.1% 7.6 5.0%Other 0.9 3.7% 1.1 3.8% 1.2 4.0%------------------------ ------- ------- ------- ------- ------ ------- 34.0 7.0% 29.4 7.0% 22.2 7.1%------------------------ ------- ------- ------- ------- ------ ------- The following amounts were measured in accordance with the requirements of FRS17: As at 31 March ------------------------------------- ---------------- 2005 2004 2003 £m £m £m------------------------------------- ------- ------- -------Market value of schemes' assets 34.0 29.4 22.2Present value of funded schemes' liabilities (35.0) (30.9) (27.8)------------------------------------- ------- ------- -------Deficit in the funded schemes before impact oftaxation (1.0) (1.5) (5.6)Related deferred tax asset 0.3 0.5 1.7------------------------------------- ------- ------- -------Net pension liability (0.7) (1.0) (3.9)------------------------------------- ------- ------- ------- Movement in deficit during the year can be analysed below: 2005 2004 £m £m----------------------------------------- ------- -------Deficit at start of year (1.5) (5.6)Movement:Current service cost (0.9) (0.9)Contributions 2.7 3.1Other finance income 0.2 0.1Actuarial (loss)/gain recognised (1.5) 1.8----------------------------------------- ------- -------Deficit in the funded schemes at end of year before impact oftaxation (1.0) (1.5)----------------------------------------- ------- ------- 33 Post-retirement benefits (continued) (b) Defined benefit schemes (continued) (ii) Profit and loss account The amounts charged in the profit and loss account comprises of the following: ------------------------------------------ ------- ------- 2005 2004 £m £m------------------------------------------ ------- -------Amount charged to operating profit in respect of defined benefitschemes:Current service cost (0.9) (0.9)------------------------------------------ ------- -------Amount credited/(charged) to net interest:Expected return on schemes' asset 1.9 1.6Interest on schemes' liabilities (1.7) (1.5)------------------------------------------ ------- -------Amount credited as other finance income 0.2 0.1------------------------------------------ ------- -------Total charge to profit and loss account (before impact oftaxation) (0.7) (0.8)------------------------------------------ ------- ------- (iii) Statement of total recognised gains and losses The amount recognised in the statement of total recognised gains and lossescomprises the following: ----------------------------------------- ------- ------- 2005 2004 £m £m----------------------------------------- ------- -------Actual return less expected return on schemes' assets (see note(iv)) 1.4 3.8Experience losses arising on the schemes' liabilities (see note(iv)) (0.4) (0.5)Losses resulting in changes in the assumptions underlying thepresent value of the schemes' liabilities (2.5) (1.5)----------------------------------------- ------- -------Actuarial (loss)/gain recognised in the statement of totalrecognised gains and losses (1.5) 1.8Movement in deferred tax relating to pension scheme (0.3) (1.2)----------------------------------------- ------- -------Net impact in statement of total recognised gains and losses (1.8) 0.6----------------------------------------- ------- ------- (iv) History of experience gains and (losses) 2005 2004----------------------------------------- ------- -------Difference between the actual and expected return on schemes'assets:Amount (£m) 1.4 3.8Percentage of the schemes' assets which relate to the BurberryGroup 4.1% 11.9% Experience losses on schemes' liabilitiesAmount (£m) (0.4) (0.5)Percentage of the present value of liabilities which relate tothe Burberry Group 1.1% 1.6% Total amount recognised in the statement of total recognisedgains and losses:Amount (£m) (1.5) 1.8Percentage of the present value of schemes' liabilities whichrelate to the Burberry Group 4.3% 4.9%----------------------------------------- ------- ------- 33 Post-retirement benefits (continued) (b) Defined benefit schemes (continued) Supplemental executive retirement plan US Rose Marie Bravo is entitled to these plans as explained in the Report ondirectors' remuneration and related matters. The adoption of FRS 17, see note 3,does not have a material impact on the reported obligation. Retirement indemnities France Burberry France S.A. offers lump sum benefits at retirement to all employeesthat are employed by the company based on the length of service and salary. Thebalance sheet provision at 31 March 2005 was £0.2m (2004: £0.2m). The adoptionof FRS 17, see note 3, does not have a material impact on the reportedobligation. There are no assets held by Burberry Group companies in relation tothis commitment. (c) Defined contribution schemes The GUS Money Purchase Pension Plan UK This scheme was introduced during the year to 31 March 1999 with the aim ofproviding pension benefits for those GUS group employees in the UK who,hitherto, had been ineligible for GUS defined benefit pension scheme membership.The assets of the GUS scheme are held separately from those of GUS plc in anindependently administered fund. As at 31 March 2005, there were no prepaymentsor arrears in Burberry Group contributions (2004: £nil). The Burberry Money Purchase Plan US Burberry Group administers a Money Purchase Plan in the US (a 401(k) scheme),which covers all eligible full-time employees who have reached the age of 21 andhave completed one full year of service. The assets of the scheme are heldseparately from those of Burberry Group in an independently administered fund.As at 31 March 2005 there were no Burberry Group contributions in arrears (2004:£nil). Burberry Asia Limited Retirement Scheme Burberry Group administers a Money Purchase Plan in Hong Kong, which covers alleligible full-time employees. The assets of the scheme are held separately fromthose of Burberry Group in an independently administered fund. As at 31 March2005 there were no Burberry Group contributions in arrears (2004: £nil). 34 Related party transactions GUS plc and other GUS group companies are related parties of Burberry Group asGUS plc owns the majority shareholding in Burberry Group plc. (a) Trading transactions and balances arising in the normal course of business The following purchases and balances have arisen from transactions betweenBurberry Group and other GUS group companies including recharges made and thepurchase of services from other GUS group companies, all of which are whollyowned subsidiaries of GUS plc. The services purchased by Burberry Group include treasury and cash management,tax management, insurance and insurance management, pension, human resources,employee benefit administration, vehicle hire, property advice, marketingservices, credit references, distribution and warehouse facilities, and certaininternal audit support. Purchases from GUS group companies for the year to 31 March ----------------------------------------------Related party Related party's 2005 2004 relationship £m £m------------------- ----------------------- ------- ------Purchases from Ultimate parent company related parties or 100% subsidiary of GUS plc and GUS plc 2.4 3.3other GUSgroupcompanies ------------------- ----------------------- ------- ------ Amounts due to GUS group companies as at 31 March -----------Related party Related party's 2005 2004 relationship £m £m------------------- ----------------------- ------- ------Related party Ultimate parent company creditors or 100% subsidiary of GUS plc and GUS plc 6.8 6.8other GUSgroupcompanies ------------------- ----------------------- ------- ------ (b) Funding transactions and balances arising in the normal course of business Amounts have been deposited with GUS group companies in accordance withBurberry's counterparty risk policy during the year. A total of £18.3m wasdeposited with GUS at 31 March 2005 (2004: £15.8m). These deposits have beenmade on standard commercial terms and were repaid in cash by 29 April 2005. In addition forward currency contracts have been undertaken with GUS groupcompanies, which have been subject to Burberry's counterparty risk policy. Thefair value at 31 March 2005 of such hedges amounted to £0.5m (2004: £0.4m). (c) Share repurchase programme As part of the Share repurchase programme, 10,212,035 Ordinary Shares werepurchased by the Company from GUS, representing a total cost, includingexpenses, of £40.6m. Of the total number of Ordinary Shares purchased, 9,642,005have been cancelled and the remaining 570,030 Ordinary Shares were cancelledafter the year end. The repurchases have been carried out in accordance with theauthorisation for off-market purchases approved by Shareholders at the EGM heldon 20 December 2004. Principal subsidiaries Country of Nature of businessCompany incorporation --------------- ---------- -------------------------- EuropeBurberry Limited England and Luxury goods retailer, wholesaler, Wales manufacturer and licensorBurberry Italy Retail England and Luxury goods retailerLimited WalesThe Scotch House Limited* England and Luxury goods brand and licensor WalesWoodrow-Universal Limited* England and Textile manufacturer WalesBurberry France S.A. France Luxury goods retailer and wholesalerBurberry (Suisse) S.A.* Switzerland Luxury goods retailer and wholesalerBurberry Italy SRL* Italy Luxury goods wholesalerBurberry (Deutschland) Germany Luxury goods retailer andGmbH wholesalerBurberry (Spain) S.A. Spain Luxury goods retailer and wholesalerMercader y Casadevall S.A. Spain Luxury goods retailerBurberry (Spain) Retail Spain Luxury goods retailerS.L.North AmericaBurberry Limited USA Luxury goods retailerBurberry (Wholesale) USA Luxury goods wholesalerLimitedHampstead Properties Inc. USA Property companyBurberry Realty, Inc. USA Property companyAsia PacificBurberry Asia Ltd Hong Kong Luxury goods retailer and wholesalerBurberry (Singapore) Singapore Luxury goods retailer andDistribution Company Pte wholesalerLtdBurberry Pacific Pty Ltd Australia Luxury goods retailer and wholesalerBurberry Korea Ltd Korea Luxury goods retailer and wholesalerBurberry (Malaysia) Sdn Malaysia Luxury goods retailerBhdBurberry Japan KK Japan Service company--------------- ---------- --------------------------*Held directly by Burberry Group plc All principal subsidiary companies are wholly owned as at 31 March 2005 andoperate principally in the country in which they are incorporated, with theexception of Burberry Italy Retail Limited, which operates principally in Italy.Non-operating intermediate holding and financing companies are excluded from theabove. Burberry Group plc is 65.5% owned by GUS Holdings Limited, a subsidiary of GUSplc, which is registered in England and Wales. The ultimate parent undertakingand controlling party is GUS plc. Copies of GUS plc consolidated financialstatements can be obtained from the Company Secretary at GUS plc, One StanhopeGate, London, W1K 1AF. Five year summary 2001* 2002* 2003* 2004 2005 (Pro forma) (Pro forma) (Restated) (Restated)Turnover by product £m £m £m £m £mcategory ------ ------ ------ ------ ---------------------------------Womenswear 134.7 165.2 197.9 225.7 242.1Menswear 142.4 149.4 162.8 190.1 194.5Accessories(including childrens) 98.0 125.8 169.5 189.0 197.6Other 6.9 5.3 5.1 4.0 2.9Licence 45.8 53.5 58.3 67.0 78.4--------------------------- ------ ------ ------ ------ ------Total 427.8 499.2 593.6 675.8 715.5--------------------------- ------ ------ ------ ------ ------ Turnover by destination £m £m £m £m £m--------------------------- ------ ------ ------ ------ ------Europe 259.0 286.7 302.7 346.8 356.4North America 90.9 110.5 140.5 162.4 165.9Asia Pacific 74.6 100.1 147.0 162.6 186.6Other 3.3 1.9 3.4 4.0 6.6--------------------------- ------ ------ ------ ------ ------Total 427.8 499.2 593.6 675.8 715.5--------------------------- ------ ------ ------ ------ ------ Turnover by operation £m £m £m £m £m--------------------------- ------ ------ ------ ------ ------Wholesale 238.8 288.8 306.9 351.4 371.9Retail 143.2 156.9 228.4 257.4 265.2Licence 45.8 53.5 58.3 67.0 78.4--------------------------- ------ ------ ------ ------ ------Total 427.8 499.2 593.6 675.8 715.5--------------------------- ------ ------ ------ ------ ------ Profit by operation £m £m £m £m £m--------------------------- ------ ------ ------ ------ ------Wholesale and Retail 29.2 42.7 64.3 86.6 98.5Licence 39.5 47.6 52.4 56.0 67.0--------------------------- ------ ------ ------ ------ ------EBITA** 68.7 90.3 116.7 142.6 165.5 Net interestincome/(expense) 5.7 (0.5) (0.9) 2.3 4.9Foreign currencygain/(loss) on loanswith GUS group(pre-flotation) 6.8 (0.1) (2.3) - -Goodwill amortisation (3.6) (4.9) (6.4) (6.8) (6.8)Exceptional items 2.9 - (22.0) 2.2 0.8--------------------------- ------ ------ ------ ------ ------Profit on ordinaryactivities beforetaxation 80.5 84.8 85.1 140.3 164.4Tax on profit onordinary activities (26.1) (28.3) (32.9) (47.3) (54.5)--------------------------- ------ ------ ------ ------ ------Profit on ordinaryactivities aftertaxation 54.4 56.5 52.2 93.0 109.9--------------------------- ------ ------ ------ ------ --------------------------------- ------ ------ ------ ------ ------ Margin analysis % % % % %--------------------------- ------ ------ ------ ------ ------ Gross margin as % ofturnover 47.8 50.3 56.0 57.9 59.3EBITA** as % ofturnover 16.1 18.1 19.7 21.1 23.1--------------------------- ------ ------ ------ ------ ------*Years to 31 March 2001, 2002, 2003 have not been restated to reflect the impactof adopting FRS 17 as the necessary data is not available, see note 3.**Earnings before interest, taxation, goodwill amortisation and exceptionalitems. Pro forma financial information Pro forma financial information has been extracted from the Listing Particularsof the Company, dated 12 July 2002. The pro forma financial information has beenprepared by combining the historical financial information for each of theCompanies that comprise the Burberry Group. The pro forma information relates tothe financial years prior to the flotation of Burberry Group. On flotation theBurberry Group was reorganised and a legal statutory group was formed, as aconsequence statutory consolidations have been performed for the years to 31March 2003, 2004 and 2005. Five year summary (continued) 2001* 2002* 2003* 2004 2005 (Pro forma) (Pro forma) (Restated) (Restated)Earnings and dividends Pence Pence Pence Pence Pence per share per share per share per share per share------------------------ ------- ------- ------- ------- -------Basic earnings pershare 10.9 11.3 10.5 18.8 22.2Basic earnings pershare beforegoodwillamortisation andexceptional items 11.2 12.3 14.9 19.8 23.4Diluted earningsper share 10.8 11.1 10.3 18.4 21.8Diluted earningsper share beforegoodwillamortisation andexceptional items 11.1 12.1 14.6 19.4 23.0Dividend per share(post-flotationonly) n/a n/a 3.0 4.5 6.5Dividend cover* n/a n/a 5.0 4.4 3.7------------------------ ------- ------- ------- ------- -------*Based on profit after taxation before goodwill amortisation and exceptionalitems. 2001 2002 2003 2004 2005 (Pro forma) (Pro forma) (Restated)Balance sheet £m £m £m £m £m------------------------ ------- ------- ------- ------- -------Fixed assets, investmentand other intangible assets 101.0 125.4 162.4 150.7 167.0Working capital(excluding cash and borrowings) 76.1 87.7 73.8 66.6 77.7Other long term liabilities (9.1) (3.9) (10.6) (10.8) (9.8)------------------------ ------- ------- ------- ------- -------Net operating assets 168.0 209.2 225.6 206.5 234.9Goodwill 89.2 94.9 122.8 110.6 107.1Deferred considerationfor acquisitions (12.9) (22.5) (31.7) (31.7) (32.7)Cash at bank, net ofoverdraft and borrowings 5.4 21.3 79.6 157.9 169.9Taxation (includingdeferred taxation) (10.0) (20.5) 0.4 1.0 (2.9)Dividends payable - - (10.0) (14.9) (21.7)------------------------ ------- ------- ------- ------- -------Net assets 239.7 282.4 386.7 429.4 454.6------------------------ ------- ------- ------- ------- ------- 2001 2002 2003 2004 2005 (Pro forma) (Pro forma) (Restated)Cash flow £m £m £m £m £m------------------------ ------- ------- ------- ------- ------- Operating profit beforegoodwill amortisation and exceptional items 68.7 90.3 116.7 142.6 165.5 Depreciation, impairmentand trademark amortisationcharges 11.1 14.0 19.0 28.5 24.4 Loss/(profit) ondisposal offixed assets and similar non-cash charges - 0.2 1.5 1.7 (2.3) Charges in respect ofemployee share incentive schemes - - - 3.6 5.3 (Increase)/decrease in stocks (11.9) (7.0) 5.2 (7.5) (12.8) Increase in debtors (1.0) (5.2) (2.4) (1.5) (7.3) Increase/(decrease) in creditors 22.2 (2.2) 25.0 18.2 2.7------------------------ ------- ------- ------- ------- ------- Net cash inflow fromoperatingactivities beforecapital expenditure andfinancialinvestment 89.1 90.1 165.0 185.6 175.5Purchase of tangible andintangible fixed assets (39.3) (39.4) (55.7) (28.8) (37.2)Sale of tangible fixed assets 19.1 0.5 0.2 - 3.1------------------------ ------- ------- ------- ------- -------Net cash inflow fromoperating activities 68.9 51.2 109.5 156.8 141.4------------------------ ------- ------- ------- ------- -------*Years to 31 March 2001, 2002, 2003 have not been restated to reflect the impactof adopting FRS 17 as the necessary data is not available, see note 3. Shareholder information Registrar Enquiries concerning holdings of the Company's shares and notification of theholder's change of address should be referred to Lloyds TSB Registrars, TheCauseway, Worthing, West Sussex, BN99 6DA, telephone: 0870 600 3970. Inaddition, Lloyds TSB Registrars offer a range of shareholder information onlineat www.shareview.co.uk. A text phone facility for those with hearingdifficulties is available by contacting telephone: 0870 600 3950. Share price information The latest Burberry Group plc share price is available on Ceefax and also on theFinancial Times Cityline Service on 0906 843 2727 (calls charged at 60p perminute). Internet A full range of investor relations information on Burberry Group plc, includinglatest share price and dividend history, is available at www.burberry.com Financial calendar------------------------------------- ------------- First quarter trading update and Annual General Meeting 14 July 2005Final dividend record date 22 July 2005Final dividend to be paid 3 August 2005First half trading update October 2005Preliminary announcement of interim results 15 November 2005Third quarter trading update January 2006Second half trading update April 2006Preliminary announcement of annual results May 2006------------------------------------- ------------- Registered officeBurberry Group plc18-22 HaymarketLondonSW1Y 4DQ Telephone: 020 7968 0000 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Burberry