Burberry share price: Underlying full-year profit falls 10%
Burberry (LON:BRBY) has updated investors on its full-year results, posting a 10-percent fall in underlying profits. The company has further unveiled a three-year plan to drive growth.
**Highlights from the company statement:**
Total revenue £2,515m, down 1% underlying, unchanged at reported FX
Adjusted profit before tax £421m, down 10% underlying, down 8% at reported FX. Reported profit before tax £416m (2015: £445m)
Retail/wholesale revenue unchanged underlying; adjusted operating profit down 8% underlying. Year-on-year reduction of about £65m in performance-related pay charge and increase of £35m in store impairment and onerous lease charges. Adjusted operating margin of 15.4% (2015: 16.3%)
Adjusted diluted EPS down 9% to 69.9p (2015: 76.9p); reported diluted EPS down 8%. Tax rate on adjusted profit before tax of 24.7% (2015: 23.4%)
Full year dividend per share up 5% to 37.0p (2015: 35.2p); payout of 53% in line with our target ratio of about 50% based on adjusted diluted EPS
Year-end net cash increased by £108m to £660m; capital expenditure of £138m lower than planned; inventory increase of £50m, largely current season stock; £158m dividend payment
Retail: In FY 2017, net new space is expected to contribute low single-digit percentage growth to total retail revenue. Around 15 mainline store openings are planned, with a similar number of closures.
Wholesale: Burberry expects total wholesale revenue at constant exchange rates in the six months to 30 September 2016 to be down by around 10% on the same period last year (H1 2015: £305m). This reflects significantly tighter inventory control by US wholesale customers, continued cautious ordering in other regions and the elevation of Beauty distribution in key markets.
FX impact on retail/wholesale adjusted profit: In FY 2017, if exchange rates* remain at current levels, we expect FY 2017 reported adjusted retail/wholesale profit to benefit by about £50m compared to FY 2016 rates. This compares to an expected benefit of about £60m at the time of the Second Half Trading Update based on 31 March 2016 effective rates.
Licensing: Total licensing revenue for FY 2017 is planned to be down by about £20m at constant exchange rates (FY 2016: £42m), primarily reflecting the expiry of the Japanese Burberry licences.
FY 2017 adjusted PBT: Since the Second Half Trading Update in April 2016
· The external environment has remained challenging and underlying cost inflation pressures persist
· The benefit from exchange rates is about £10m lower
· We expect to deliver around £20m of cost savings and invest about £10m
· We are planning on a new performance-related pay charge of about £20m in addition to the existing charge of about £20m
As a result, we currently expect FY 2017 adjusted profit before tax to be towards the bottom of the range of analysts’ expectations and more second-half weighted than in FY 2016.
In addition, to deliver the savings, about £20-30m of one-off costs in FY 2017 are expected which will be excluded from adjusted profit.
· Initiatives identified to deliver enhanced revenue growth and improved productivity
– Strong brand with significant opportunities by channel, product and region
– Plan to outperform sector growth over time
– Revenue initiatives focus on key products, retail productivity and e-commerce
– In-depth review of ways of working results in plan to reduce complexity and simplify processes to enable future growth
– Programme to deliver annualised cost savings of at least £100m by FY 2019.
As of 07:09 BST, Wednesday, 18 May, Burberry Group plc share price is 1,144.50p.