Financial results under IFRS
Burberry Group PLC
10 June 2005
Burberry Group plc
Financial results under IFRS
10 June 2005. Burberry Group plc reports on its unaudited financial results for
the year to 31 March 2005 and six months to 30 September 2004 under
International Financial Reporting Standards (IFRS).
For the year to 31 March 2005, primary differences under IFRS relative to
previously reported financial results under UK GAAP are highlighted below:
• Turnover and gross profit unchanged.
• EBITA (1) under IFRS of £161.3 million compared to £165.5 million under
UK GAAP. The £4.2 million difference primarily relates to an increased
charge under IFRS for share based remuneration payments.
• Goodwill amortisation and exceptional gain reported under UK GAAP are
not applicable under IFRS.
• Net interest income of £5.6 million under IFRS compared to £4.9 million
under UK GAAP. The £0.7 million difference primarily reflects foreign
currency gains on intercompany loans, which under IFRS are recognised in
the income statement and not taken directly to reserves.
• Effective tax rate of 32.1% compared to 32.0% reported under UK GAAP
(calculated on profit before taxation, goodwill amortisation and
exceptional gain).
• Profit after tax of £113.4 million under IFRS compared to £109.9 million
reported under UK GAAP.
• Diluted EPS of 22.4p under IFRS compared to diluted EPS (before goodwill
amortisation and exceptional gain) of 23.0p reported under UK GAAP.
• Shareholders' funds at 31 March 2005 of £478.4 million under IFRS
compared to £454.6 million reported under UK GAAP, driven by balance sheet
reclassifications and remeasurements under IFRS, including the reversal of
£21.7 million provided for the proposed final dividend payment under UK
GAAP.
International Financial Reporting Standards are subject to ongoing amendments by
the International Accounting Standards board and some standards have yet to be
endorsed by the European Commission. Further development of the interpretation
of these standards could result in changes in the basis in accounting or
presentation of certain items and accordingly this financial information is
subject to possible change.
Group income statement - unaudited
Year to 31 March 2005 Six months to September 2004
--------------- ---------------
UK GAAP IFRS IFRS UK GAAP (3) IFRS IFRS
2005 adjustments 2005 2004 adjustments 2004
£m £m £m £m £m £m
--------------------------- ------ ------ ------ ------ ------ ------
Turnover
Wholesale 371.9 - 371.9 111.0 - 111.0
Retail 265.2 - 265.2 197.2 - 197.2
Licence 78.4 - 78.4 39.3 - 39.3
--------------------------- ------ ------ ------ ------ ------ ------
Total turnover 715.5 - 715.5 347.5 - 347.5
Cost of sales (291.3) - (291.3) (144.0) - (144.0)
--------------------------- ------ ------ ------ ------ ------ ------
Gross profit 424.2 - 424.2 203.5 - 203.5
Net operating expenses (258.7) (4.2) (262.9) (124.7) (1.2) (125.9)
--------------------------- ------ ------ ------ ------ ------ ------
EBITA (1) 165.5 (4.2) 161.3 78.8 (1.2) 77.6
Goodwill amortisation (6.8) 6.8 - (3.3) 3.3 -
Exceptional gain (2) 0.8 (0.8) - 0.8 (0.8) -
--------------------------- ------ ------ ------ ------ ------ ------
Profit before interest and
taxation 159.5 1.8 161.3 76.3 1.3 77.6
Net interest income 4.9 0.7 5.6 2.0 0.6 2.6
--------------------------- ------ ------ ------ ------ ------ ------
Profit before taxation 164.4 2.5 166.9 78.3 1.9 80.2
Tax on profit (54.5) 1.0 (53.5) (26.0) 0.9 (25.1)
--------------------------- ------ ------ ------ ------ ------ ------
Attributable profit for the
year 109.9 3.5 113.4 52.3 2.8 55.1
--------------------------- ------ ------ ------ ------ ------ ------
Diluted EPS before
goodwill amortisation and
exceptional gain 23.0p n/a 10.8p n/a
Diluted EPS 21.8p 22.4p 10.3p 10.9p
Basic EPS 22.2p 22.9p 10.5p 11.1p
--------------------------- ------ ------ ------ ------ ------ ------
Notes:
(1) EBITA represents operating profit before interest, taxation, exceptional
gain and goodwill amortisation. Following the adoption of IFRS, the exceptional
gain and goodwill amortisation are no longer applicable.
(2) The £0.8m pre-tax exceptional gain in the year to 31 March 2005 under UK
GAAP relates to lapsed awards under the IPO Senior Executive Restricted Share
Plan.
(3) Amounts previously reported have been restated to reflect the impact of
adopting FRS 17 'Retirement Benefits'.
Management will discuss these results during a conference call at 8:00am today.
The conference call can be accessed by dialling +44 (0) 20 7081 7194, password
299766. This document, together with the appendices, will be available on the
Group's website at www.burberryplc.com.
Enquiries:
Burberry 020 7968 0577
Stacey Cartwright CFO
Matt McEvoy Strategy and IR
John Scaramuzza Strategy and IR
Brunswick 020 7404 5959
Susan Gilchrist
Laura Cummings
Robert Gardener
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.
This announcement does not constitute an invitation to underwrite, subscribe for
or otherwise acquire or dispose of any Burberry Group plc or GUS plc shares.
Past performance is not a guide to future performance and persons needing advice
should consult an independent financial adviser.
Burberry Group plc
Impact from adoption of IFRS
Contents
1. Introduction
2. Explanation of adjustments under IFRS
3. Restated IFRS consolidated financial information
- Consolidated income statement for the year to 31 March 2005
- Consolidated balance sheet as at 31 March 2005
- Consolidated income statement for the six months to 30 September 2004
- Consolidated balance sheet as at 30 September 2004
- Consolidated balance sheet as at 31 March 2004
Appendix 1 Basis of preparation
Appendix 2 Detailed reconciliations from UK GAAP to IFRS
Appendix 3 IFRS accounting policies
1 INTRODUCTION
For all periods up to and including the year to 31 March 2005 Burberry has
prepared its financial statements in accordance with UK Generally Accepted
Accounting Principles (UK GAAP). For the year to 31 March 2006 Burberry is
required to prepare consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) as endorsed by the European
Commission.
The Group's transition date to IFRS is 1 April 2004. This has been determined in
accordance with IFRS 1 'First Time Adoption of International Financial Reporting
Standards', being the start of the earliest period of comparative information.
To explain the transition to IFRS, the unaudited financial performance and
position of the Group has been converted from UK GAAP to IFRS for the year to 31
March 2005. An explanation of the principle adjustments required by Burberry on
conversion to IFRS is set out in section 2, with summary financial information
presented in section 3. The financial information presented includes:
• The Group's consolidated income statements for the year to 31 March 2005
and six months to 30 September 2004; and
• The Group's consolidated balance sheets at 31 March 2005, 30 September
2004 and 31 March 2004.
The consolidated income statements and balance sheets have been prepared in
accordance with the 'Basis of Preparation', see Appendix 1.
Reconciliation schedules to assist the reader in understanding the nature and
quantum of differences between UK GAAP and IFRS for the financial information
are included in Appendix 2.
This document explains all material accounting policy changes from the
accounting policies adopted in the UK GAAP financial statements for the year to
31 March 2005. A full set of IFRS accounting policies are included in Appendix
3.
The financial information presented in this document is unaudited.
2 EXPLANATION OF ADJUSTMENTS UNDER IFRS
The format of the IFRS primary financial information contained within this
document is prepared in accordance with IAS 1 'Presentation of Financial
Statements', which differs from the UK GAAP format. On the income statement in
particular, there is no equivalent for 'exceptional items'. Under IFRS, these
amounts are included in operating expenses. Burberry will continue to disclose
separately material items of a one off nature and provide adjusted earnings per
share to assist shareholders.
The IFRS changes set out below have no effect on cash flows.
The significant differences between UK GAAP and IFRS which affect the Group are
as follows:
2.1 Share based payments
Under UK GAAP, the cost of equity-settled transactions were recognised in the
year of performance to which the scheme related. The charge was recognised based
on the fair market value of the share award at the date of grant, less any
consideration receivable from the participating Burberry employee.
Under IFRS equity-settled transaction charges are recognised from the date of
grant over the vesting period of the shares. The total charge is determined with
reference to the fair value of the equity instruments awarded at the date of
grant. The fair value at the date of grant has been determined using the
Black-Scholes Option Pricing Model.
Where awards are contingent upon future events an assessment of the likelihood
of these conditions being achieved is made at the time of the award.
The impact on operating profit from the adoption of IFRS 2 is a charge of £5.1m
for the year to 31 March 2005.
2.2 Exceptional gain
Under UK GAAP an exceptional gain of £0.8m arises from the lapsing of awards
made under the IPO Senior Executive Restricted Share Plan (the 'IPO RSP').
IFRS no longer permits the use of exceptional items. It does however allow
material items to be separately identified. These items will typically be
material, non-recurring items.
2.3 Intangible fixed assets
a) Goodwill amortisation
Under UK GAAP, goodwill was capitalised and amortised over its estimated useful
economic life and a charge of £6.8m was recorded in the year to 31 March 2005.
Under IFRS, goodwill has been assigned an indefinite life as at the date of
transition and it is no longer amortised. Burberry has elected to apply the
exemption related to Business Combinations and has frozen its goodwill at its
carrying value as at 1 April 2004. All accumulated amortisation at this point in
time has been reclassified against the cost of the goodwill. Impairment reviews
will be carried out on goodwill on an annual basis and any impairment charge
would be charged and if applicable reported as a material item.
No impairment charge was required and accordingly no charge has been recorded in
the year to 31 March 2005.
b) Computer software
Under UK GAAP, computer software was included within tangible fixed assets.
Under IFRS, computer software is considered to be an intangible fixed asset,
unless it is an integral part of the related hardware. The period over which the
computer software is amortised is not affected.
Accordingly, a net reclassification of £1.8m as at 1 April 2004 and of £1.6m as
at 31 March 2005 has been made between intangible fixed assets and property,
plant and equipment. There is no impact on the income statement as a result of
this reclassification.
2.4 Foreign exchange
Under UK GAAP, any foreign exchange movements arising on the translation of net
assets of foreign subsidiaries were recognised by charging or crediting the
amounts directly to the profit and loss reserve account. In addition, any
exchange difference arising on intercompany loans was also taken directly to the
profit and loss reserve account where the loan formed part of the net investment
in the subsidiary.
Under IFRS, any foreign exchange movements arising on the translation of foreign
subsidiaries is to be taken to a separate component of equity, the foreign
currency translation reserve. Any exchange difference arising on an intercompany
loan should be taken through the income statement, unless the loan is deemed to
form part of the direct investment in the subsidiary.
In the year to 31 March 2005 these movements resulted in an unrealised foreign
exchange gain of £0.7m. These amounts will vary from year to year as they are
generated by exchange movements. It is Burberry's intention that where possible
future foreign exchange gains or losses arising on intercompany loans will be
charged or credited directly to retained earnings. This could be achieved by
restructuring the foreign currency intercompany loan balances.
2.5 Deferred taxation
Under UK GAAP, deferred tax was recognised for all timing differences (being the
difference between an entities taxable profits and its statutory results) which
are expected to reverse.
Deferred tax under IAS 12 'Income Taxes' is recognised on all taxable temporary
differences and all deductible temporary differences and unused tax losses, to
the extent that it is probable there are sufficient taxable profits available in
future periods. Temporary differences are the difference between the tax base of
an asset/liability and its carrying amount in the financial statements.
The most significant difference between IFRS and UK GAAP, is that deferred tax
is now recognised on the revaluation of fixed assets. On transition to IFRS an
additional deferred tax liability of £12.6m has been recorded as at 1 April 2004
and a liability of £5.3m as at 31 March 2005.
2.6 Dividends
Under UK GAAP, proposed dividends are recorded as a liability at the balance
sheet date. Under IFRS, dividends proposed at the balance sheet date are only
recorded as a liability when the shareholders have approved their distribution,
or for the interim dividend when approved by the Board.
The final dividend proposed as at 31 March 2004 of £14.9m has been reversed in
the opening balance sheet and charged in the year to 31 March 2005. The final
dividend proposed as at 31 March 2005 of £21.7m has been reversed in the income
statement and will be charged in the year to 31 March 2006.
2.6 Dividends (continued)
The recognition of the charge in the income statement in relation to dividends
does not affect the timing of dividend payments or Burberry's dividend policy.
2.7 Non-current assets held for sale
Under IFRS, any non-current asset whose carrying value will be recovered
principally through sale, and the sale of the asset is highly probable, should
be classified as non-current assets held for sale on the balance sheet. The
amounts reclassified from property, plant and equipment to non-current assets
held for sale as at 31 March 2005 was £1.2m.
2.8 Revaluation reserve
The Group has elected to adopt the exemption set out in IFRS 1 and to hold the
tangible fixed assets at their historic cost or revalued amount on transition to
IFRS. As a result of this, the balance on the revaluation reserve at the date of
transition has been reclassified to retained earnings. The amounts included in
retained earnings in relation to the revaluation reserve will be separately
identified in the Annual Report as this amount is not considered to be
distributable until the relevant property is disposed of.
2.9 Earnings per share
The calculation of basic earnings per share is based on attributable profit for
the period divided by the weighted average number of Ordinary Shares in issue
during the period.
Diluted earnings per share is based on the weighted average number of Ordinary
Shares in issue during the period. In addition, account is taken of any awards
which will have dilutive effects when exercised (full vesting of all outstanding
awards is assumed).
Year to Six months to
31 March 30 September
2005 2004
£m £m
------------------------------------------- ------- -------
Attributable profit for the period 113.4 55.1
------------------------------------------- ------- -------
The weighted average number of Ordinary Shares represents the weighted average
number of Burberry Group plc Ordinary Shares in issue throughout the period,
excluding Ordinary Shares held in the Burberry Group's ESOPs.
Year to Six months to
31 March 30 September
2005 2004
Million Million
------------------------------------------- ------- -------
Weighted average number of
Ordinary Shares in issue during the period 494.1 496.2
Dilutive effect of the share incentive
schemes 10.4 10.9
------------------------------------------- ------- -------
Diluted weighted average number of
Ordinary Shares in issue during the period 504.5 507.1
------------------------------------------- ------- -------
Year to Six months to
31 March 30 September
2005 2004
Earnings per share Pence Pence
------------------------------------------- ------- -------
Basic earnings per share 22.9 11.1
------------------------------------------- ------- -------
Diluted earnings per share 22.4 10.9
------------------------------------------- ------- -------
2.10 Financial instruments
IAS 32 'Financial Instruments: Disclosures and Presentations' (IAS 32) and IAS
39 'Financial Instruments: Recognition and Measurement' (IAS 39) address the
accounting for, and reporting of financial instruments. The Group has elected to
take the option to defer the restatement of comparative information for IAS 32
and IAS 39.
IAS 39 sets out detailed accounting requirements in relation to financial assets
and liabilities. All derivative financial instruments are accounted for at fair
market value whilst other financial instruments are accounted for either at
amortised cost or at fair value depending on their classification.
If certain key criteria are met financial instruments, financial assets and
financial liabilities may be designated as forming hedge relationships as a
result of which changes in their value are offset in the income statement or
charged/credited to equity depending on the nature of the hedge relationship.
From 1 April 2005, the Group will adopt IAS 32 and IAS 39 and subject to meeting
certain criteria will adopt hedge accounting for the majority of the Group's
forward currency contracts which are taken out to hedge the cost of foreign
currency inventory.
In addition when IAS 32 is adopted, redeemable preference shares will not be
treated as equity as they will be considered to be a liability and the dividends
paid on these shares classified as an interest expense.
GROUP INCOME STATEMENT
For the year to 31 March 2005 - unaudited
UK GAAP IFRS IFRS
(IFRS format) reclassifications remeasurements IFRS
£m £m £m £m
----------------------------- ------- ------- ------- -------
Turnover 715.5 - - 715.5
Cost of sales (291.3) - - (291.3)
----------------------------- ------- ------- ------- -------
Gross profit 424.2 - - 424.2
Operating expenses (266.9) - 1.8 (265.1)
Other operating income 2.2 - - 2.2
----------------------------- ------- ------- ------- -------
Operating profit 159.5 - 1.8 161.3
----------------------------- ------- ------- ------- -------
Operating profit before
goodwill amortisation and
exceptional gain 165.5 - (4.2) 161.3
- Goodwill amortisation (6.8) - 6.8 -
- Exceptional gain relating
to IPO employee share plans 0.8 - (0.8) -
----------------------------- ------- ------- ------- -------
Interest and similar income 5.5 - 0.7 6.2
Interest expense and similar
charges (0.6) - - (0.6)
----------------------------- ------- ------- ------- -------
Profit before taxation 164.4 - 2.5 166.9
Tax on profit (54.5) - 1.0 (53.5)
----------------------------- ------- ------- ------- -------
Attributable profit for the
year 109.9 - 3.5 113.4
----------------------------- ------- ------- ------- -------
All the profit for the year is attributable to the equity
holders of the company.
----------------------------- ------- ------- ------- -------
Pence per share
Earnings
- basic 22.2p 22.9p
- diluted 21.8p 22.4p
Earnings before exceptional
items and goodwill
- basic 23.4p n/a
- diluted 23.0p n/a
----------------------------- ------- ------- ------- -------
CONSOLIDATED BALANCE SHEET
As at 31 March 2005 - unaudited
UK GAAP IFRS IFRS
(IFRS format) reclassifications remeasurements IFRS
£m £m £m £m
----------------------------- ------- ------- ------- -------
ASSETS
Non-current assets
Intangible assets 107.9 1.6 6.8 116.3
Property, plant and equipment 166.1 (2.8) - 163.3
Available-for-sale financial
instruments 0.1 - - 0.1
Deferred taxation assets 18.4 13.3 (5.3) 26.4
Trade and other receivables 1.2 - - 1.2
Income tax recoverable 0.8 - - 0.8
------------------------------ ------- ------- ------- -------
294.5 12.1 1.5 308.1
Current assets
Stock 102.5 - - 102.5
Trade and other receivables 112.2 - - 112.2
Income tax recoverable 3.1 - - 3.1
Cash and cash equivalents 169.9 - - 169.9
------------------------------ ------- ------- ------- -------
387.7 - - 387.7
Non-current assets classified
as held for sale - 1.2 - 1.2
------------------------------ ------- ------- ------- -------
387.7 1.2 - 388.9
------------------------------ ------- ------- ------- -------
Total assets 682.2 13.3 1.5 697.0
LIABILITIES
Non-current liabilities
Long-term liabilities (14.8) - - (14.8)
Deferred taxation liabilities - (13.0) - (13.0)
Retirement benefit obligations (1.8) (0.3) - (2.1)
Provisions (3.2) - - (3.2)
------------------------------ ------- ------- ------- -------
(19.8) (13.3) - (33.1)
Current liabilities
Trade and other payables (182.6) - 22.3 (160.3)
Income tax liabilities (25.2) - - (25.2)
------------------------------ ------- ------- ------- -------
(207.8) - 22.3 (185.5)
------------------------------ ------- ------- ------- -------
Total liabilities (227.6) (13.3) 22.3 (218.6)
------------------------------ ------- ------- ------- -------
Net assets 454.6 - 23.8 478.4
------------------------------ ------- ------- ------- -------
EQUITY
Ordinary share capital 1.1 - - 1.1
Share premium account 136.1 - - 136.1
Revaluation reserve 23.4 (23.4) - -
Capital reserve 39.4 - (14.5) 24.9
Translation reserve - 5.0 - 5.0
Retained earnings 254.6 18.4 38.3 311.3
------------------------------ ------- ------- ------- -------
Total equity 454.6 - 23.8 478.4
------------------------------ ------- ------- ------- -------
GROUP INCOME STATEMENT
For the 6 months to 30 September 2004 - unaudited
UK GAAP
(Restated*) IFRS IFRS
(IFRS format) reclassifications remeasurements IFRS
£m £m £m £m
----------------------------- ------- ------- ------- -------
Turnover 347.5 - - 347.5
Cost of sales (144.0) - - (144.0)
----------------------------- ------- ------- ------- -------
Gross profit 203.5 - - 203.5
Operating expenses (128.0) - 1.3 (126.7)
Other operating income 0.8 - - 0.8
----------------------------- ------- ------- ------- -------
Operating profit 76.3 - 1.3 77.6
----------------------------- ------- ------- ------- -------
Operating profit before
goodwill amortisation and
exceptional gain 78.8 - (1.2) 77.6
- Goodwill amortisation (3.3) - 3.3 -
- Exceptional gain relating
to IPO employee share plans 0.8 - (0.8) -
----------------------------- ------- ------- ------- -------
Interest and similar income 2.2 - 0.8 3.0
Interest expense and
similar charges (0.2) - (0.2) (0.4)
----------------------------- ------- ------- ------- -------
Profit before taxation 78.3 - 1.9 80.2
Tax on profit (26.0) - 0.9 (25.1)
----------------------------- ------- ------- ------- -------
Attributable profit for the
period 52.3 - 2.8 55.1
----------------------------- ------- ------- ------- -------
All the profit for the year is attributable to the equity
holders of the company
----------------------------- ------- ------- ------- -------
Pence per share
Earnings
- basic 10.5p 11.1p
- diluted 10.3p 10.9p
Earnings before exceptional
items and goodwill
- basic 11.1p n/a
- diluted 10.8p n/a
----------------------------- ------- ------- ------- -------
* Amounts previously reported have been restated to reflect the impact of
adopting FRS 17 'Retirement Benefits'.
CONSOLIDATED BALANCE SHEET
As at 30 September 2004 - unaudited
UK GAAP
(Restated*) IFRS IFRS
(IFRS format) reclassifications remeasurements IFRS
£m £m £m £m
----------------------------- ------- ------- ------- -------
ASSETS
Non-current assets
Intangible assets 110.5 1.7 3.3 115.5
Property, plant and equipment 161.4 (4.5) - 156.9
Available-for-sale financial
instruments 0.1 - - 0.1
Deferred taxation assets 22.3 11.3 (12.9) 20.7
Trade and other receivables 1.1 - - 1.1
Income tax recoverable 0.8 - - 0.8
----------------------------- -------- -------- -------- --------
296.2 8.5 (9.6) 295.1
Current assets
Stock 104.4 - - 104.4
Trade and other receivables 143.4 - - 143.4
Income tax recoverable 0.1 - - 0.1
Cash and cash equivalents 143.5 - - 143.5
----------------------------- -------- -------- -------- --------
391.4 - - 391.4
Non-current assets
classified as held for sale - 2.8 - 2.8
----------------------------- -------- -------- -------- --------
391.4 2.8 - 394.2
----------------------------- -------- -------- -------- --------
Total assets 687.6 11.3 (9.6) 689.3
LIABILITIES
Non-current liabilities
Long-term liabilities (14.5) - - (14.5)
Deferred taxation liabilities - (10.8) - (10.8)
Retirement benefit obligations (2.0) (0.5) - (2.5)
Provisions (5.0) - - (5.0)
----------------------------- -------- -------- -------- --------
(21.5) (11.3) - (32.8)
Current liabilities
Trade and other payables (156.1) - 10.8 (145.3)
Income tax liabilities (29.4) - 3.3 (26.1)
Bank overdrafts (0.5) - - (0.5)
----------------------------- -------- -------- -------- --------
(186.0) - 14.1 (171.9)
----------------------------- -------- -------- -------- --------
Total liabilities (207.5) (11.3) 14.1 (204.7)
----------------------------- -------- -------- -------- --------
Net assets 480.1 - 4.5 484.6
----------------------------- -------- -------- -------- --------
EQUITY
Ordinary share capital 1.1 - - 1.1
Share premium account 133.9 - - 133.9
Revaluation reserve 23.8 (23.8) - -
Capital reserve 41.4 - (15.7) 25.7
Translation reserve - 9.6 - 9.6
Retained earnings 279.9 14.2 20.2 314.3
----------------------------- -------- -------- -------- --------
Total equity 480.1 - 4.5 484.6
----------------------------- -------- -------- -------- --------
* Amounts previously reported have been restated to reflect the impact of
adopting FRS 17 'Retirement Benefits'.
CONSOLIDATED BALANCE SHEET
As at 31 March 2004 - unaudited
UK GAAP IFRS IFRS
(IFRS format) reclassifications remeasurements IFRS
£m £m £m £m
----------------------------- ------- ------- ------- -------
ASSETS
Non-current assets
Intangible assets 111.4 1.8 - 113.2
Property, plant and
equipment 149.8 (2.5) - 147.3
Available-for-sale
financial instruments 0.1 - - 0.1
Deferred taxation assets 22.1 11.2 (12.6) 20.7
Trade and other receivables 1.5 - - 1.5
Income tax recoverable 0.8 - - 0.8
----------------------------- ------- ------- ------- -------
285.7 10.5 (12.6) 283.6
Current assets
Stock 89.5 - - 89.5
Trade and other receivables 99.0 - - 99.0
Income tax recoverable 2.8 - - 2.8
Cash and cash equivalents 158.7 - - 158.7
----------------------------- ------- ------- ------- -------
350.0 - - 350.0
Non-current assets
classified as held for sale - 0.7 - 0.7
----------------------------- ------- ------- ------- -------
350.0 0.7 - 350.7
----------------------------- ------- ------- ------- -------
Total assets 635.7 11.2 (12.6) 634.3
LIABILITIES
Non-current liabilities
Long-term liabilities (35.4) - - (35.4)
Deferred taxation liabilities - (10.7) - (10.7)
Retirement benefit obligations (2.0) (0.5) - (2.5)
Provisions (5.1) - - (5.1)
----------------------------- ------- ------- ------- -------
(42.5) (11.2) - (53.7)
Current liabilities
Trade and other payables (138.3) - 15.4 (122.9)
Income tax liabilities (24.7) - - (24.7)
Bank overdrafts (0.8) - - (0.8)
----------------------------- ------- ------- ------- -------
(163.8) - 15.4 (148.4)
----------------------------- ------- ------- ------- -------
Total liabilities (206.3) (11.2) 15.4 (202.1)
----------------------------- ------- ------- ------- -------
Net assets 429.4 - 2.8 432.2
----------------------------- ------- ------- ------- -------
EQUITY
Ordinary share capital 1.1 - - 1.1
Share premium account 124.7 - - 124.7
Revaluation reserve 23.5 (23.5) - -
Capital reserve 42.9 (17.8) 25.1
Retained earnings 237.2 23.5 20.6 281.3
----------------------------- ------- ------- ------- -------
Total equity 429.4 - 2.8 432.2
----------------------------- ------- ------- ------- -------
The financial information presented in this document has been prepared on the
basis of all International Financial Reporting Standards (IFRS), including the
International Accounting Standards (IAS), and interpretations issued by the
International Accounting Standards Board (IASB) and its committees, and as
interpreted by any regulatory bodies applicable to the Group published by 31
March 2005. These are subject to ongoing amendments by the IASB and subsequent
endorsement by the European Commission and are therefore subject to possible
change. It is possible, therefore, that changes to this information may be
required before it is published as comparative information in the interim
results for the 6 months to 30 September 2005 and the Annual Report for the year
to 31 March 2006.
In preparing this financial information, the Group has assumed that the European
Commission will endorse the amendment to IAS 19 'Employee Benefits - Actuarial
Gains and Losses, Group Plans and Disclosures'. In addition, Burberry has
decided to adopt early IFRS 5 'Non-current Assets Held for Sale and Discontinued
Operations'.
The format of the IFRS primary financial information contained within this
document, is prepared in accordance with IAS 1 'Presentation of Financial
Statements'. The format of the primary financial information is a particular
area where changes may occur as further interpretative guidance is issued and
best practice develops.
FIRST TIME ADOPTION EXEMPTIONS (IFRS 1)
IFRS 1 requires the Group to determine its accounting policies for the year to
31 March 2006 and to apply these policies to the opening balance sheet (1 April
2004) and throughout all periods presented in its first IFRS financial
statements.
The Group's full set of IFRS accounting policies have been included as a
separate appendix, see Appendix 3.
The general principal that should be applied on first-time adoption of IFRS is
that the standards in force at the first reporting date (that is, for Burberry,
31 March 2006) should be applied retrospectively. However, IFRS 1 contains a
number of exemptions which companies are permitted to apply. These exemptions
and the Group's choices have been set out below:
a) Business combinations completed before the transition to IFRS
IFRS 1 allows the first time adopter of IFRS to elect not to apply IFRS 3
'Business Combinations' retrospectively to business combinations which took
place before the date of transition (1 April 2004).
The Group has elected to use this exemption and has not restated any business
combinations which took place prior to this transition date.
b) Fair value or revaluation to be treated as deemed cost
Certain items of property, plant and equipment are carried under UK GAAP at
amounts based upon valuations. The Group has applied the exemption which permits
a first time adopter to use a previous GAAP revaluation of an item of property,
plant and equipment as deemed cost. Consequently, there is no adjustment to the
previous carrying value under UK GAAP.
c) Employee benefits
Under IFRS 1 an entity may elect to recognise immediately all actuarial gains
and losses on transition even if the corridor approach is adopted for future
actuarial gains and losses. This exemption does not apply to Burberry as the
obligation recognised under UK GAAP will not change on transition to IFRS.
The Group has previously recognised all cumulative actuarial gains and losses in
relation to employee benefit schemes under UK GAAP in the statement of total
recognised gains and losses. Under IFRS the Group will continue to recognise all
actuarial gains and losses in relation to employee benefit schemes in the
statement of recognised income and expenses.
d) Cumulative translation differences
IFRS 1 allows an exemption for first-time adopters from calculating the
cumulative translation differences on the historical retranslation of the net
assets of foreign subsidiaries.
The Group has elected to use this exemption and has set the foreign currency
translation reserve to zero as at the date of transition to IFRS.
From the date of transition, IFRS requires amounts taken to reserves arising on
the retranslation of foreign subsidiaries to be recorded in a separate foreign
currency transaction reserve.
e) Share-based payment transactions
A first-time adopter of IFRS is not required to apply IFRS 2 'Share-based
Payments' to equity instrument which were granted on or before 7 November 2002.
However, certain disclosures are still required to be made regarding these
equity instruments.
The Group has elected not to use this exemption, has previously disclosed the
fair values of awards in its UK GAAP accounts for the year to 31 March 2005, and
accordingly has applied IFRS 2 for all share based payments.
f) Financial instruments
The Group has elected to take the option to defer the restatement of the
comparative information for IAS 32 'Financial Instruments: Disclosures and
Presentation' and IAS 39 'Financial Instruments, Recognition and Measurements'.
The financial instruments continue to be accounted for in accordance with UK
GAAP for the year to 31 March 2005.
For the year to 31 March 2006, the adjustment to record financial instruments in
accordance with IFRS will be accounted for as a change in accounting policy. It
is the Group's intention to apply hedge accounting where the requirements of IAS
32 and IAS 39 are met.
GROUP INCOME STATEMENT
For the year to 31 March 2005 - unaudited
UK GAAP IAS 21 IAS 12 IFRS 3 IFRS 2
(IFRS Foreign Deferred tax Business IAS 10 Share based
format) exchange remeasurement combinations Dividends payments Other IFRS
£m £m £m £m £m £m £m £m
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Turnover 715.5 - - - - - - 715.5
Cost of sales (291.3) - - - - - - (291.3)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Gross profit 424.2 - - - - - - 424.2
Operating expenses (266.9) - - 6.8 - (5.1) 0.1 (265.1)
Other operating income 2.2 - - - - - - 2.2
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Operating profit 159.5 - - 6.8 - (5.1) 0.1 161.3
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Operating profit before
goodwill amortisation
and exceptional gain 165.5 - - - - (4.3) 0.1 161.3
- Goodwill amortisation (6.8) - - 6.8 - - - -
- Exceptional gain
relating to IPO
employee share plans 0.8 - - - - (0.8) - -
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Interest and
similar income 5.5 0.7 - - - - - 6.2
Interest expense and
similar charges (0.6) - - - - - - (0.6)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Profit before taxation 164.4 0.7 - 6.8 - (5.1) 0.1 166.9
Tax on profit (54.5) (0.2) 1.2 - - - - (53.5)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Attributable profit/
(loss) for the year 109.9 0.5 1.2 6.8 - (5.1) 0.1 113.4
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
CONSOLIDATED BALANCE SHEET
As at 31 March 2005 - unaudited
IAS 38 IAS 12
In- IFRS 5 Deferred IAS 12 IFRS 3 IFRS 2
tangible Assets IFRS 1 tax Deferred Bus- Share
UK GAAP asset held Re- IAS 21 asset tax iness IAS 10 based
(IFRS reclass- for valuation Foreign reclass- remeasure- combin- Divi- pay-
format)ification resale reserve exchange ification ment ations dends ments Other IFRS
£m £m £m £m £m £m £m £m £m £m £m £m
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
ASSETS
Non-current
assets
Intangible
assets 107.9 1.6 - - - - - 6.8 - - - 116.3
Property,
plant and
equipment 166.1 (1.6) (1.2) - - - - - - - - 163.3
Available-
for-sale
financial
instruments 0.1 - - - - - - - - - - 0.1
Deferred
taxation
assets 18.4 - - - - 13.3 (5.3) - - - - 26.4
Trade and
other
receivables 1.2 - - - - - - - - - - 1.2
Income tax
recoverable 0.8 - - - - - - - - - - 0.8
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
294.5 - (1.2) - - 13.3 (5.3) 6.8 - - - 308.1
Current
assets
Stock 102.5 - - - - - - - - - - 102.5
Trade and
other
receivables 112.2 - - - - - - - - - - 112.2
Income tax
recoverable 3.1 - - - - - - - - - - 3.1
Cash and cash
equivalents 169.9 - - - - - - - - - - 169.9
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
387.7 - - - - - - - - - - 387.7
Non-current
assets
classified as
held for sale - - 1.2 - - - - - - - - 1.2
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
387.7 - 1.2 - - - - - - - - 388.9
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total assets 682.2 - - - - 13.3 (5.3) 6.8 - - - 697.0
LIABILITIES
Non-current
liabilities
Long-term
liabilities (14.8) - - - - - - - - - - (14.8)
Deferred
taxation
liabilities - - - - - (13.0) - - - - - (13.0)
Retirement
benefit
obligations (1.8) - - - - (0.3) - - - - - (2.1)
Provisions (3.2) - - - - - - - - - - (3.2)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
(19.8) - - - - (13.3) - - - - - (33.1)
Current
liabilities
Trade and
other
payables (182.6) - - - - - - - 21.7 0.7 (0.1) (160.3)
Income tax
liabilities (25.2) - - - - - - - - - - (25.2)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
(207.8) - - - - - - - 21.7 0.7 (0.1) (185.5)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total
liabilities (227.6) - - - - (13.3) - - 21.7 0.7 (0.1) (218.6)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Net assets 454.6 - - - - - (5.3) 6.8 21.7 0.7 (0.1) 478.4
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
EQUITY
Ordinary share
capital 1.1 - - - - - - - - - - 1.1
Share premium
account 136.1 - - - - - - - - - - 136.1
Revaluation
reserve 23.4 - - (23.4) - - - - - - - -
Capital
reserve 39.4 - - - - - - - - (14.5) - 24.9
Translation
reserve - - - - 5.0 - - - - - - 5.0
Retained
earnings 254.6 - - 23.4 (5.0) - (5.3) 6.8 21.7 15.2 (0.1) 311.3
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total equity 454.6 - - - - - (5.3) 6.8 21.7 0.7 (0.1) 478.4
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
GROUP INCOME STATEMENT
For the 6 months to 30 September 2004 - unaudited
UK GAAP
(Restated*) IAS 21 IAS 12 IFRS 3 IFRS 2
(IFRS Foreign Deferred tax Business IAS 10 Share based
format) exchange remeasurement combinations Dividends payments Other IFRS
£m £m £m £m £m £m £m £m
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Turnover 347.5 - - - - - - 347.5
Cost of sales (144.0) - - - - - - (144.0)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Gross profit 203.5 - - - - - - 203.5
Operating expenses (128.0) - - 3.3 - (2.1) 0.1 (126.7)
Other operating income 0.8 - - - - - - 0.8
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Operating profit 76.3 - - 3.3 - (2.1) 0.1 77.6
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Operating profit before
goodwill amortisation
and exceptional gain 78.8 - - - - (1.3) 0.1 77.6
- Goodwill amortisation (3.3) - - 3.3 - - - -
- Exceptional gain
relating to IPO
employee share plans 0.8 - - - - (0.8) - -
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Interest and similar
income 2.2 0.8 - - - - - 3.0
Interest expense and
similar charges (0.2) (0.2) - - - - - (0.4)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Profit before taxation 78.3 0.6 - 3.3 - (2.1) 0.1 80.2
Tax on profit (26.0) (0.3) 1.2 - - - - (25.1)
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
Attributable profit/
(loss) for the
period 52.3 0.3 1.2 3.3 - (2.1) 0.1 55.1
----------------------- -------- ------- ------- ------- ------- ------- ------- -------
* Amounts previously reported have been restated to reflect the impact of
adopting FRS 17 'Retirement Benefits'.
CONSOLIDATED BALANCE SHEET
As at 30 September 2004 - unaudited
IAS 38 IAS 12
In- IFRS 5 Deferred IAS 12 IFRS 3 IFRS 2
UK GAAP tangible Assets IFRS 1 tax Deferred Bus- Share
(Restated) asset held Re- IAS 21 asset tax iness IAS 10 based
(IFRS reclass- for valuation Foreign reclass- remeasure- combin- Divi- pay-
format)ification resale reserve exchange ification ment ations dends ments Other IFRS
£m £m £m £m £m £m £m £m £m £m £m £m
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
ASSETS
Non-current
assets
Intangible
assets 110.5 1.7 - - - - - 3.3 - - - 115.5
Property,
plant and
equipment 161.4 (1.7) (2.8) - - - - - - - - 156.9
Available-
for-sale
financial
instruments 0.1 - - - - - - - - - - 0.1
Deferred
taxation
assets 22.3 - - - - 11.3 (12.9) - - - - 20.7
Trade and
other
receivables 1.1 - - - - - - - - - - 1.1
Income tax
recoverable 0.8 - - - - - - - - - - 0.8
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
296.2 - (2.8) - - 11.3 (12.9) 3.3 - - - 295.1
Current
assets
Stock 104.4 - - - - - - - - - - 104.4
Trade and
other
receivables 143.4 - - - - - - - - - - 143.4
Income tax
recoverable 0.1 - - - - - - - - - - 0.1
Cash and cash
equivalents 143.5 - - - - - - - - - - 143.5
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
391.4 - - - - - - - - - - 391.4
Non-current
assets
classified as
held for sale - - 2.8 - - - - - - - - 2.8
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
391.4 - 2.8 - - - - - - - - 394.2
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total assets 687.6 - - - - 11.3 (12.9) 3.3 - - - 689.3
LIABILITIES
Non-current
liabilities
Long-term
liabilities (14.5) - - - - - - - - - - (14.5)
Deferred
taxation
liabilities - - - - - (10.8) - - - - - (10.8)
Retirement
benefit
obligations (2.0) - - - - (0.5) - - - - - (2.5)
Provisions (5.0) - - - - - - - - - - (5.0)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
(21.5) - - - - 11.3 - - - - - (32.8)
Current
liabilities
Trade and
other
payables (156.1) - - - - - - - 10.0 1.0 (0.2) (145.3)
Income tax
liabilities (29.4) - - - - - 3.3 - - - - (26.1)
Bank
overdrafts (0.5) - - - - - - - - - - (0.5)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
(186.0) - - - - - 3.3 - 10.0 1.0 (0.2) (171.9)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total
liabilities (207.5) - - - - 11.3 3.3 - 10.0 1.0 (0.2) (204.7)
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Net assets 480.1 - - - - - (9.6) 3.3 10.0 1.0 (0.2) 484.6
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
EQUITY
Ordinary share
capital 1.1 - - - - - - - - - - 1.1
Share premium
account 133.9 - - - - - - - - - - 133.9
Revaluation
reserve 23.8 - - (23.8) - - - - - - - -
Capital
reserve 41.4 - - - - - - - - (15.7) - 25.7
Translation
reserve - - - - 9.6 - - - - - - 9.6
Retained
earnings 279.9 - - 23.8 (9.6) - (9.6) 3.3 10.0 16.7 (0.2) 314.3
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
Total equity 480.1 - - - - - (9.6) 3.3 10.0 1.0 (0.2) 484.6
------- ------ ----- ------ ------ ------ ----- ----- ---- ----- ----- -----
* Amounts previously reported have been restated to reflect the impact of
adopting FRS 17 'Retirement Benefits'.
CONSOLIDATED BALANCE SHEET
As at 31 March 2004 - unaudited
IAS 38 IAS 12
In- IFRS 5 Deferred
tangible Assets IFRS 1 tax IAS 12 IFRS 2
UK GAAP asset held Re- asset Deferred Share
(IFRS reclass- for valuation reclass- tax IAS 10 based
format)ification resale reserve ification remeasurement Dividends payments Other IFRS
£m £m £m £m £m £m £m £m £m £m
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
ASSETS
Non-current
assets
Intangible
assets 111.4 1.8 - - - - - - - 113.2
Property,
plant and
equipment 149.8 (1.8) (0.7) - - - - - - 147.3
Available-for-
sale financial
instruments 0.1 - - - - - - - - 0.1
Deferred
taxation
assets 22.1 - - - 11.2 (12.6) - - - 20.7
Trade and
other
receivables 1.5 - - - - - - - - 1.5
Income tax
recoverable 0.8 - - - - - - - - 0.8
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
285.7 - (0.7) - 11.2 (12.6) - - - 283.6
Current assets
Stock 89.5 - - - - - - - - 89.5
Trade and
other
receivables 99.0 - - - - - - - - 99.0
Income tax
recoverable 2.8 - - - - - - - - 2.8
Cash and cash
equivalents 158.7 - - - - - - - - 158.7
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
350.0 - - - - - - - - 350.0
Non-current
assets
classified as
held for sale - - 0.7 - - - - - - 0.7
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
350.0 - 0.7 - - - - - - 350.7
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
Total assets 635.7 - - - 11.2 (12.6) - - - 634.3
LIABILITIES
Non-current
liabilities
Long-term
liabilities (35.4) - - - - - - - - (35.4)
Deferred
taxation
liabilities - - - - (10.7) - - - - (10.7)
Retirement
benefit
obligations (2.0) - - - (0.5) - - - - (2.5)
Provisions (5.1) - - - - - - - - (5.1)
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
(42.5) - - - (11.2) - - - - (53.7)
Current
liabilities
Trade and
other payables (138.3) - - - - - 14.9 0.7 (0.2) (122.9)
Income tax
liabilities (24.7) - - - - - - - - (24.7)
Bank
overdrafts (0.8) - - - - - - - - (0.8)
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
(163.8) - - - - - 14.9 0.7 (0.2) (148.4)
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
Total
liabilities (206.3) - - - (11.2) - 14.9 0.7 (0.2) (202.1)
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
Net assets 429.4 - - - - (12.6) 14.9 0.7 (0.2) 432.2
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
EQUITY
Ordinary share
capital 1.1 - - - - - - - - 1.1
Share premium
account 124.7 - - - - - - - - 124.7
Revaluation
reserve 23.5 - - (23.5) - - - - - -
Capital
reserve 42.9 - - - - - - (17.8) - 25.1
Retained
earnings 237.2 - - 23.5 - (12.6) 14.9 18.5 (0.2) 281.3
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
Total equity 429.4 - - - - (12.6) 14.9 0.7 (0.2) 432.2
---------- ------- -------- ------- ------ ------- ------- ------- ------- ------ ------
Basis of consolidation
The Group annual financial statements comprise those of the parent company and
its subsidiaries, presented as a single economic entity. The financial
statements of the subsidiaries are prepared for the same reporting year as the
parent company, using consistent accounting policies.
The effects of intra-group transactions are eliminated in preparing the Group
financial statements.
Subsidiaries are consolidated from the date on which control is transferred to
the Group and cease to be consolidated from the date on which control is
transferred out of the Group. Where there is a loss of control of a subsidiary,
the consolidated financial statements include the results for the portion of the
reporting period during which Burberry Group plc had control.
Key sources of estimation uncertainty
Preparation of the consolidated financial statements in conformity with IFRS
requires that management make certain estimates and assumptions concerning
future events that may affect the reported amounts in the financial statements
and accompanying notes. Actual results could differ from these estimates.
Such estimates include but are not limited to asset impairment, stock
provisioning, employee benefits obligations, contingent consideration for
acquisitions, and the probability of deferred tax assets being recovered against
future taxable profits.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
a) Turnover
Turnover, which is stated excluding VAT and other sales taxes, is the amount
receivable for goods supplied (less returns, trade discounts and allowances) and
royalties receivable.
Wholesale sales are recognised when goods are despatched to trade customers,
with provisions made for expected returns and allowances. Retail sales, returns
and allowances are reflected at the dates of transactions with consumers, in
addition provisions are made for expected returns. Royalties receivable from
licensees are accrued as earned on the basis of the terms of the relevant
royalty agreement, which is typically on the basis of production volumes.
(b) Intangible fixed assets
Goodwill
Goodwill is the excess of purchase consideration over the fair value of
identifiable net assets acquired. Goodwill on acquisition is recorded as an
intangible fixed asset. Fair values are attributed to the identifiable assets,
liabilities and contingent liabilities that existed at the date of acquisition,
reflecting their condition at that date. Adjustments are also made to bring the
accounting policies of acquired businesses into alignment with those of Burberry
Group.
Prior to 31 March 2004, goodwill was held at cost less accumulated amortisation.
Goodwill was assigned a finite useful economic life, not exceeding 20 years, and
was amortised in equal annual instalments. Upon transition to International
Financial Reporting Standards on 1 April 2004, goodwill was assigned an
indefinite useful economic life in accordance with International Financial
Reporting Standard 3 'Business Combinations', and it ceased to be amortised.
Impairment reviews are performed annually, or more frequently if events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Trademarks and other intellectual property
The cost of securing and renewing trademarks and other intellectual property is
capitalised as an intangible fixed asset and amortised by equal annual
instalments over its useful economic life, typically 10 years. The useful
economic life of trademarks and other intellectual property is determined on a
case-by-case basis, in accordance with the terms of the underlying agreement.
Impairment reviews are performed if events or changes in circumstances indicate
that the carrying value may not be recoverable.
Computer Software
The cost of acquiring computer software (including licences and separately
identifiable external development costs) is capitalised as an intangible asset
at purchase price, plus any directly attributable cost of preparing that asset
for its intended use. Software costs are amortised by equal annual instalments
over their estimated useful economic lives, which are up to 5 years.
c) Property, plant and equipment
Property, plant and equipment is stated at cost or revalued amount less
accumulated depreciation and provision to reflect any impairment in value. Prior
to 31 March 1996, the Group's policy was to revalue freehold properties, but at
1 April 1996 this policy was changed. The previously revalued properties were
then carried at their 1996 revaluation amount. On 1 April 2004, upon transition
to International Financial Reporting Standards, these revaluation amounts were
taken to be the 'deemed cost' of the properties.
Depreciation
Depreciation of tangible fixed assets is calculated to write-off the cost or
deemed cost, less residual value, of the assets in equal annual instalments over
their estimated useful lives at the following rates:
Land Not depreciated
Freehold buildings Up to 50 years
Leaseholds - less than 50 years expired Over the
unexpired term
of the lease
Plant, machinery, fixtures and fittings 3 - 8 years
Retail fixtures and fittings 2 - 5 years
Office equipment 5 years
Computer equipment Up to 5 years
------------------------------- ----------------------
Impairment
Impairment reviews are undertaken when performance trends or changes in
circumstances suggest that the net book value of an item of property, plant or
equipment is not fully recoverable.
Profit/loss on disposal of property, plant and equipment
Profits and losses on disposal of property, plant and equipment represent the
difference between the net proceeds and net book value at the date of sale.
Disposals are accounted for when the relevant transaction becomes unconditional.
d) Non-current assets held for sale
A non-current asset is classified as held for sale, when its carrying value will
be recovered principally through sale
Non-current assets held for sale are carried at the lower of cost or fair value
less costs to sell and are not depreciated.
e) Impairment of assets
Assets that have an indefinite useful economic life are not subject to
amortisation and are tested annually for impairment. Assets that are subject to
amortisation or depreciation are reviewed for impairment whenever events or
changes in circumstance indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units).
f) Stock
Stock and work in progress are valued on a first-in-first-out basis at the lower
of cost (including an appropriate proportion of production overhead) and net
realisable value. Provision is made to reduce cost to no more than net
realisable value having regard to the age and condition of stock, as well as its
anticipated saleability.
g) Financial instruments
A financial instrument is recognised on the balance sheet when the entity
becomes a party to the contractual provisions of the instrument. A financial
asset is no longer recognised when, the contractual rights to the cash flow
expire or the asset is transferred. A financial liability is no longer
recognised, when the obligation specified in the contract is discharged,
cancelled or expires.
The Group's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, and certain derivative
instruments.
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits with an original
maturity date of 3 months or less, held with banks, liquidity funds as well as
bank overdrafts. Bank overdrafts are recorded under current liabilities on the
balance sheet.
Trade and other receivables
Trade and other receivables arise when the Group provides money, goods or
services directly to a third party. They are included in current assets, except
for maturities greater than 12 months after the balance sheet date. Receivables
are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. A
provision for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. The amount of the provision is
recognised in the income statement.
Trade and other payables
Trade and other payables arise when the Group acquires money, goods or services
directly from a creditor with no intention of trading the payable. They are
included in current liabilities, except for maturities greater than 12 months
after the balance sheet date. Payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.
Available for sale financial assets
Available for sale financial assets are non-derivative financial assets that
have been designated in this category, or are not classified as loans and
receivables, held-to-maturity investments, or financial assets at fair value
through the profit and loss.
Available for sale financial assets are initially recognised at fair value, plus
transaction costs that are directly attributable to the acquisition.
Subsequently the available for sale financial assets are measured at fair value,
with gains and losses being recognised directly in equity. The cumulative gain
or loss remains in equity until the available for sale financial asset is
derecognised, when it is released to the income statement. Investments in equity
instruments that do not have a quoted market price in an active market and whose
fair value cannot be reliably measured are measured at cost.
h) Share capital
Ordinary shares and redeemable preference shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable incremental
costs is deducted from equity attributable to the Company's equity holders until
the shares are cancelled, reissued or disposed of. Where such shares are
subsequently sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects,
is include in equity attributable to the Company's equity holders.
i) Deferred tax
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, if the
temporary difference arises from initial recognition of an asset or liability in
a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is exempt
from deferred tax. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiaries, except where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are not discounted.
j) Pension costs
The pension costs in the consolidated financial statements are determined in
accordance with IAS 19 'Employee Benefits'.
Defined benefit schemes
Eligible employees of Burberry Group participate in a number of GUS defined
benefit schemes throughout the world; the principal defined benefit scheme is in
the UK. The assets covering this arrangement are held in independently
administered funds.
The cost of providing defined pension benefits to participating Burberry
employees is charged to the profit and loss account over the anticipated period
of employment, in accordance with recommendations made by independent qualified
actuaries. Any difference between the cumulative amounts charged against profit
and contributions paid is included as an asset or liability as appropriate in
the balance sheet.
The asset or liability recognised in the balance sheet in respect of defined
benefit schemes represents Burberry's share of the present value of the defined
benefit obligation at the balance sheet date, less the fair value of plan
assets, together with adjustments for unrecognised actuarial gains and losses
and past service costs. A full actuarial valuation of the scheme is carried out
every 3 years with interim reviews in intervening years. The latest full
actuarial valuation of the scheme was carried out as at 31 March 2004 by
independent, qualified actuaries, using the projected unit method.
Actuarial gains and losses are recognised directly to equity through the
statement of recognised income and expenses
Defined contribution schemes
Burberry Group eligible employees also participate in GUS group defined
contribution pension schemes, the principal one being in the UK with its assets
held in an independently administered fund. The cost of providing these benefits
to participating Burberry employees is recognised in the profit and loss account
and comprises the amount of contributions payable to the schemes in respect of
the year.
k) Share schemes
Incentive plans
Employees in the Group (including directors) receive certain share incentives.
The cost of the share incentives is measured with reference to the fair value of
the equity instruments awarded at the date of grant. The Black-Scholes Option
Pricing Model is used to determine the fair value of the award made. The impact
of performance conditions is not considered in determining the fair value on the
date of grant, except for conditions linked to the price of Burberry Group plc
shares. Vesting conditions, which relate to non-market conditions, are included
in the assumptions about the number of options expected to vest. The estimate of
the number of options expected to vest is revised at each balance sheet date.
The cost of the share based incentives are recognised as an expense over the
vesting period of the awards, with a corresponding increase in equity.
The proceeds received from the exercise of the equity instruments awarded, net
of any directly attributable transaction costs, are credited to share capital
and share premium.
l) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency').
Transactions in foreign currencies
Transactions denominated in foreign currencies within each entity in the Group,
are translated into the functional currency at the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies, which are held at year-end, are translated into the functional
currency at the exchange rate ruling at the balance sheet date. Exchange
differences on monetary items are taken to the income statement in the period in
which they arise, except where these exchange differences form part of a net
investment in overseas subsidiaries of Burberry Group, in which case such
differences are taken directly to the foreign currency translation reserve
within equity.
l) Foreign currency translation (continued)
Translation of the results of overseas businesses
The results of overseas subsidiaries are translated into the Group's
presentation currency of Sterling at the average exchange rate for the year. The
average exchange rate is used, as it is considered to approximate the actual
exchange rates on the date of the transactions. The assets and liabilities of
such undertakings are translated at year-end exchange rates. Differences arising
on the retranslation of the opening net investment in subsidiary companies, and
on the translation of their results, are taken directly to the foreign currency
translation reserve within equity and are reported in the consolidated statement
of changes in equity. The principal exchange rates used were as follows:
Average
---------------------------------------- ------------- -------
Year to 6 months to
31 March 30 September
2005 2004
---------------------------------------- ------- -------
Euro 1.47 1.49
US dollar 1.85 1.81
Hong Kong dollar 14.40 14.13
Korean won 2,041 2,099
---------------------------------------- ------- -------
Closing
----------------------------------- ------------------
As at As at As at
31 March 30 September 31 March
2005 2004 2004
----------------------------------- ------- ------- -------
Euro 1.45 1.46 1.50
US dollar 1.88 1.81 1.84
Hong Kong dollar 14.69 14.07 14.31
Korean won 1,920 2,078 2,106
----------------------------------- ------- ------- -------
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
The average exchange rate achieved by Burberry Group on its Yen royalty income,
taking into account its use of Yen forward sale contracts on a monthly basis
approximately 12 months in advance of royalty receipts, was Yen 184.3: £1 in the
year to 31 March 2005 (in the six months to 30 September 2004 : Yen 182.0 : £1).
m) Operating leases
Burberry Group is both a lessee and lessor of property. Gross rental income and
expenditure in respect of operating leases are recognised on a straight-line
basis over the period of the leases. Certain rental expense is determined on the
basis of turnover achieved in specific retail locations and is accrued for on
that basis.
Lease premiums and incentives
Amounts paid to acquire the rights to a lease ('Lease premiums') are written off
in equal annual instalments over the life of the lease. Lease incentives,
typically rent-free periods and capital contributions, are recognised over the
full term of the lease.
n) Dividend Distribution
Dividend distributions to Burberry Group plc's shareholders are recognised as a
liability in the period in which the dividends are approved by the shareholders
for the final dividend or approved by the directors for the interim dividend.
This information is provided by RNS
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