20 May 2015 

 

Burberry Group plc

 

Preliminary results for the year ended 31 March 2015

 

Burberry posts robust results with revenue of £2.5bn, up 11% underlying and adjusted profit before tax of £456m, up 7% underlying

 

Our intense focus on core heritage British-made trench coats and cashmere scarves was a principal driver of the year's growth, alongside the investment in digital, which continued to outperform across all regions

 

·    Strong underlying financial performance

- Revenue £2.5bn, up 11% underlying, up 8% at reported FX

- Adjusted profit before tax £456m, up 7% underlying

- After £38m adverse exchange rate impact, down 1% at reported FX

- Reported profit before tax £445m (2014: £444m)

- Net cash up £150m

- Full year dividend 35.2p, up 10%

 

·    Ongoing investment drove continued brand and business momentum

- Retail sales up 14% underlying

- Comparable sales growth of 9%

- Double-digit % growth in Americas and EMEIA

- Mid single-digit % growth in Asia Pacific, given disruption in Hong Kong

- Global team's focus on heritage trench coats and scarves drove growth

- Investment focused in flagship markets including

- Store openings in Los Angeles and Tokyo

- Events in Shanghai and Los Angeles, celebrating our British heritage

- Continued investment in digital service, data analytics and owned and third party platforms led to digital again outperforming in all regions

 

·    Expected exchange rate benefit in FY 2016 now reduced to about £10m at current rates

 

Christopher Bailey, Chief Creative and Chief Executive Officer, commented:

 

"We are pleased to report a strong full year performance, with revenue up 11% and adjusted profit up 7% underlying.  Against a challenging external backdrop, our global team has focused ever more intensely on our core, including celebrating the British-made products that are our brand signature and extending our online and offline integration. 

 

At this early stage of the year, we are seeing increased uncertainty in some markets.  Against this background, we will continue to manage our business dynamically - capitalising on the significant opportunities we have by channel, region and product to create long-term shareholder value."

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

 

Adjusting items are:

·      A charge of £14.9m in reported operating expenses being the amortisation of the fragrance and beauty licence intangible asset (2014: £14.9m)

·      Put option liability finance income of £3.7m in the reported net finance income relating to the third party 15% economic interest in the Chinese business (2014: a charge of £1.7m)

Details of adjusting items are contained in Note 7 of the Notes to the Financial Information.

 

Underlying performance is presented in this announcement as, in the opinion of the Directors, it provides additional understanding of the ongoing performance of the Group.

 

Underlying performance is calculated before adjusting items and removes the effect of changes in exchange rates compared to the prior period. This takes into account both the impact of the movement in exchange rates on the translation of overseas subsidiaries' results and also now on foreign currency procurement and sales through the Group's UK supply chain.

 

Certain financial data within this announcement have been rounded.

 

Enquiries

 

Burberry
Carol Fairweather	Chief Financial Officer	020 3367 3524
Fay Dodds	VP, Investor Relations
Julian Payne	VP, PR and Corporate Relations	020 3428 8975

 

Brunswick			020 7404 5959
Nick Claydon
Laura Buchanan

 

·      There will be a presentation today at 9.30am (UK time) to investors and analysts at Horseferry House, Horseferry Road, London, SW1P 2AW

·      The presentation can be viewed live on the Burberry website www.burberryplc.com and can also be accessed live via a dial-in facility on +44 (0)20 3003 2666

·      The supporting slides and an indexed replay will be available on the website later in the day

·      Burberry will issue its First Quarter Trading Update on 15 July 2015

·      The AGM will be held on 16 July 2015

 

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

 

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

 

BURBERRY, the Equestrian Knight Device and the Burberry Check are trademarks belonging to Burberry which are registered and enforced worldwide.

Group financial highlights 

 

 

Total revenue £2,523m, up 11% underlying, up 8% at reported FX

 

Adjusted profit before tax £456m, up 7% underlying, down 1% at reported FX.  Reported profit before tax £445m (2014: £444m)

 

Significant impact from exchange rates, reducing reported revenue by £72m and adjusted PBT by £38m

 

Retail/wholesale revenueup 12% underlying; adjusted operating profit up 8% underlying; adjusted operating margin of 16.3%

 

Adjusted diluted EPS up 2% to 76.9p (2014: 75.4p); reported diluted EPS up 4%

 

Full year dividend per share up 10% to 35.2p (2014: 32.0p); payout based on adjusted diluted EPS of 46% (2014: 42%), reflecting our intention to move progressively to a 50% dividend payout ratio

 

Year-end net cash increased by £150m to £552m; operating cash flow up 6% year-on-year to £568m including tight control of working capital; £156m of capital expenditure

 

 

	Year to 31 March			% change
£ million	2015	2014		reported FX	underlying
Revenue	2,523.2	2,329.8		8	11
Cost of sales	(757.7)	(671.3)		(13)
Gross margin	1,765.5	1,658.5		6
Operating expenses*	(1,310.3)	(1,198.2)		(9)
Adjusted operating profit	455.2	460.3		(1)	7
Net finance credit*	0.6	0.7		-
Adjusted profit before taxation	455.8	461.0		(1)	7
Adjusting items	(11.2)	(16.6)
Profit before taxation	444.6	444.4		-
Taxation	(103.5)	(112.1)
Non-controlling interest	(4.8)	(9.8)
Attributable profit	336.3	322.5
Adjusted EPS (pence)~	76.9	75.4		2
EPS (pence)~	75.1	72.1		4
Weighted average number of ordinary shares (millions)~	447.8	447.3

 

Adjusted measures exclude adjusting items

* Excludes adjusting items.  For detail, see page 2

^~ EPS is presented on a diluted basis

BUSINESS AND FINANCIAL REVIEW

 

Burberry delivered a strong financial performance in FY 2015, with underlying growth of 11% in revenue and 7% in adjusted profit before tax.  Against a challenging external environment, and with rapidly-changing consumer behaviour, we constantly evolved and executed our key strategies and initiatives.  Our continuing investment in retail and digital, as well as the global team's focus on our core products - British-made heritage trench coats and cashmere scarves - were the principal drivers of the year's growth.

 

In FY 2015, Burberry continued to deliver robust growth reflecting the strength of the brand and its products, underpinned by continued investment in key growth initiatives.  These included new stores in flagship markets, digital infrastructure improvements (upgraded mobile site and China fulfilment) and increased marketing, focused on flagship stores, iconic products and festive.

 

With the external environment becoming more uncertain in some markets since the start of the year, in FY 2016 we will continue to tightly control costs, invest selectively to drive growth while embedding more productive and efficient processes throughout the business.  Key investments will include stores in flagship markets, technology and continued digital enhancements.

 

Core strategies

As set out at the time of the interim results in November 2014, we have evolved our core strategies to reflect more accurately the current shape of the business and the scope of our future ambitions.  We also added a sixth strategy - Build our culture - ensuring our values are reflected in everything we do. 

 

Inspire with the brand

 

Brand events around the world reinforced our distinctive British identity, built around heritage trench coats and scarves.  We celebrated the opening of new flagship stores, from our "Dreams of London" event in Shanghai in April 2014 to our "London in Los Angeles" event in April 2015.  Coupled with the runway shows and the festive film "From London with Love", these initiatives further strengthened global brand awareness.

 

Innovation in our use of digital media improved engagement with existing and potential customers.  While building on our more established platforms including Facebook, Twitter and Instagram, we worked with other partners, such as WeChat in China and LINE in Japan, and have been early adopters of newer social platforms.  In April 2015, we launched on Snapchat as part of our "London in Los Angeles" event and used the new live streaming service, Periscope, to offer the first ever 'red carpet to runway' stream on the platform.

 

We continued to invest in customer data and analytics to better understand the core luxury customer.  The insights gained enabled our global teams to make more informed decisions in retail, customer service, digital and marketing, all driving productivity and efficiency improvements throughout the business. 

 

 

Realise product potential

 

There was strong customer demand for heritage trench coats, cashmere scarves and ponchos.  Combined, mainline sales of outerwear and soft accessories grew by nearly 20% in the year.  In trench coats, the assortment was simplified, focusing on three standard fits, each offered in three colours and three lengths.  In scarves, the introduction of monogramming online attracted a very strong customer response.  Growth was helped by key brand and marketing activities, which celebrated the British provenance of these products, as well as the halo effect from the My Burberry fragrance campaign.

 

Revenue in menswear, an under-represented category for Burberry, increased by 10% underlying.  Retail significantly outperformed wholesale, where repositioning continued in the United States in particular.  Mainline retail sales were driven by double-digit growth in outerwear, supported by core replenishment styles and tailoring.  Scarves and shoes drove growth in mens accessories, which comprise only about 20% of total accessories retail revenue, another area of opportunity for Burberry.  

 

Beauty delivered 26% underlying growth in the year.  Growth in fragrance (over 95% of revenue) was underpinned by the successful launch of My Burberry, product extensions around Brit Rhythm and a strong operational supply chain. 

 

 

Optimise channels

 

Retail sales grew by 14% underlying in the year, to reach 71% of group revenue (up from 70% in FY 2014).  Comparable sales growth was 9%, as product and customer service initiatives drove average selling price and conversion, against ongoing weakness in footfall in-store.  We also continued to invest in digital commerce, blurring the physical and digital experience, through an enhanced mobile site and improved user experience from search to payment to fulfilment.  Collect-in-store is now available in about 200 stores, including China and more recently Japan, and accounts for over 20% of digital revenue.

 

During the year, Burberry opened 16 mainline stores and closed 17, bringing the total to 214 globally at the year end.  Over half of the openings were in flagship markets, including Los Angeles and Tokyo, with seven airport stores, predominantly in Europe, capitalising on the opportunities we see in travel retail.  We opened 12 concessions during the year, including in Japan and the Middle East, and closed 26, reflecting further planned elevation of the portfolio in China and other parts of Asia Pacific, including South Korea. 

 

Total capital expenditure for FY 2016 is planned at around £180m (2015: £156m), with about two-thirds in retail, biased towards Asia Pacific.

 

To complement burberry.com, we continued to work with third party digital players to benefit from their reach and enhance our positioning on their sites.  This included existing partners, such as Nordstrom in the US, Harrods in the UK and Shinsegae in South Korea; as well as pure play etailers including Amazon (offering fragrance on their luxury beauty sites initially in the United States and then the UK, France and Germany) and Tmall.com, offering a selected assortment to Chinese consumers on a custom-built dedicated brand space. 

 

 

Unlock market opportunity

 

We continued to focus on improving engagement with the Chinese luxury customer both at home and when travelling.   In FY 2015, we saw double-digit percentage growth from the Chinese consumer globally in retail, albeit slowing somewhat in the second half.  About half of this spend was within China where we delivered mid to high single-digit comparable sales growth in the year, helped by increasing brand awareness and successful execution around key festive periods.  In China, we continued to evolve and elevate our store portfolio, closing a net ten stores during the year, finishing with a total of 68, with a further five or so net closures and a small reduction in average selling space planned for FY 2016.

 

In Hong Kong, we saw a fall in spend from Chinese customers in the second half of the year, reflecting disruption in this high margin market.  This fall was more than offset by growth in EMEIA and, off a small base, other parts of Asia Pacific and the Americas.

 

We made further progress in transforming our operations in Japan, ahead of the licence expiry in 2015.  Our directly-operated stores in Japan offer the global collection in the world's second largest luxury market.  Comparable sales growth was about 30% in the year.  We opened a flagship in Osaka, our fifth mainline store, relocated the store in Omotesando, Tokyo and opened three concessions, bringing the total to 13 concessions.   We have also started to invest in raising brand awareness, for example, partnering with LINE to livestream our womens runway show in February 2015.

 

Looking ahead, we remain confident in our plans for the brand transformation in Japan.   In FY 2016, we plan to open a mainline store in Shinjuku, Tokyo, open between five and ten concessions and assume operation of about ten childrenswear concessions.   As we said in April, as we build direct operations, the timing and availability of brand and commercially appropriate retail space looking forward is likely to impact our targets for FY 2017.

Revenue in the Americas grew by 16% underlying in the year, as we continued to strengthen and elevate the brand in both retail and wholesale in this market.  Investment in the United States is being concentrated in flagship markets, including the refurbishment of our San Francisco store and the relocation of the Los Angeles store in FY 2015, as well as further expansion in New York in the current year.  

  

 

Pursue operational excellence

 

In the second half of the year, we tested a new fulfilment approach for digital in China, allowing transactions to draw on inventory in both the local distribution centre and in the store network.  This improved stock availability and reduced delivery times, enhancing the customer shopping experience.  Burberry plans to implement this model of integrating online and offline inventory within both the UK and US in the current financial year.

 

We continued to optimise our assortments to drive productivity.  Further reductions in the size of our assortments supported increased procurement in key products, while the roll-out of our store profiling initiative further aligned our merchandising globally.  This initiative builds assortments by fixture rather than store size, while also taking into account the climate and customer profile of each location.  This delivers a more customer-centric range by store, driving revenue and conversion.

 

During the year, we initiated a project to upgrade our core IT systems, based around SAP which was first introduced into the business in FY 2007.  Since then, revenue has nearly trebled and this investment will enable future growth and productivity initiatives. 

 

 

Build our culture

 

As it continues to promote fair and sustainable employment practices,   

Burberry has recently become an accredited UK Living Wage employer.  We extended our commitment to pay the living wage to all directly-employed, sub-contracted and third party staff working at sites across the UK.

 

Burberry is committed to acting responsibly in all its activities, minimising its environmental impact and promoting sustainable practices across all areas of its business.  We completed the first year of a sustainable cotton farming initiative in Peru and increased our procurement of green tariff electricity to over 35% of our operating space.  We also extended our ethical trading activities to include Beauty and key raw material suppliers. 

 

Burberry believes that it is important to be a socially responsible business.  We continued to donate 1% of Group adjusted profit before tax to charitable causes around the world, principally to those helping young people realise their full potential.  Over 2,300 employees in 82 cities dedicated time to impactful community projects during the year.

 

 

 

Revenue analysis

 

 

Revenue by channel

 

	Year to 31 March			% change
£ million	2015	2014		reported FX	underlying
Retail	1,807.4	1,622.6		11	14
Wholesale	648.1	628.0		3	6
Licensing	67.7	79.2		(14)	-
Revenue	2,523.2	2,329.8		8	11

 

 

Retail

71% of revenue (2014: 70%); with 214 mainline stores, 213 concessions within department stores, digital commerce and 57 outlets

 

·    Retail sales up 14% underlying, up 11% at reported FX

·    Comparable sales up 9% (H1: 10%; H2: 9%)

·    New space contributed the balance of growth (5%)

·    Digital outperformed in all regions

 

The 9% comparable sales growth was broadly evenly balanced between halves, but reflected differing regional trends.  Americas delivered consistent double-digit percentage growth throughout the year, while growth in EMEIA improved in the second half and Asia Pacific slowed, impacted by the disruption in Hong Kong. 

 

In store, footfall declined but was offset by improved conversion and higher average transaction values.  Online, mobile doubled its share of revenue in the year, following the launch of an upgraded mobile platform in the second half.

 

In mainline retail, comparable sales growth was relatively balanced between womens, mens and accessories.  Replenishment product outperformed, with strength from the heritage trench coat and cashmere scarves.

 

Asia Pacific

With retail accounting for over 85% of revenue in Asia Pacific, comparable sales growth was mid single-digit percentage for the year.  Within this, China and South Korea grew by a high and mid single-digit percentage respectively and our directly-operated stores in Japan delivered about 30% growth.  Hong Kong, a high margin market, while positive for the year, decelerated to a mid single-digit percentage decline in the second half as footfall was significantly impacted by the disruption in the third quarter.

 

A net 14 mainline stores and concessions were closed during the year (13 openings and 27 closures), reflecting continued evolution of the store portfolio, particularly in China and South Korea.

 

Europe, Middle East, India and Africa (EMEIA)

Retail accounted for over 65% of revenue with double-digit percentage comparable sales growth for the year, strengthening in the second half in major markets.  For the year, growth was robust in France, Germany and Italy.  About half of mainline transactions in EMEIA were to travelling luxury customers and we saw growth from both this group and domestic customers.

 

A net two stores and concessions were added during the year (12 openings, ten closures), including six openings in key European airports (Barcelona, two in London, Madrid, Milan and Rome) and four concessions in the Middle East as we elevate the store portfolio there.

 

Americas

About 65% of Americas revenue came from retail, with double-digit comparable sales growth during the year evenly balanced between halves.  Domestic customers still account for about 90% of transactions.

 

The number of mainline stores in the Americas was unchanged year-on-year at 78.  Openings included a flagship in Rodeo Drive, Los Angeles and a store in the Miami Design District, while we also refurbished our San Francisco store.

 

 

Wholesale

26% of revenue (2014: 27%); generated from sales of apparel and accessories to department stores, multi-brand specialty accounts, franchise stores and travel retail; as well as Beauty to around 80 distributors worldwide

 

·    Wholesale revenue up 6% underlying, up 3% at reported FX

·    Excluding Beauty, wholesale revenue up 1% underlying, down 2% at reported FX

·    Beauty wholesale revenue was £175m, up 25% underlying, in line with guidance

·    At 31 March 2015, Burberry had 67 franchise stores globally, a net decrease of three during the year

 

The first half of the year saw wholesale revenue, excluding Beauty, increase by 5% underlying.  This was led by strong growth in Asia Pacific, specifically travel retail, partly offset by the impact of ongoing strategic initiatives, such as conversion from wholesale to retail and account rationalisation concentrated in Europe and in North America. 

 

In the second half, revenue was down 3% underlying, reflecting cautious ordering from customers selling to the European consumer and in Asian travel retail markets.  Revenue in the Americas was broadly unchanged.

 

The regional comments below exclude Beauty.

 

Asia Pacific

Asia Pacific, which is predominantly travel retail, saw mid single-digit percentage underlying revenue growth for the year.  Growth was weighted to the first half, with a mid single-digit percentage underlying decline in the second half.

 

Europe, Middle East, India and Africa

EMEIA is the group's largest wholesale region at around 45% of the group total.  Revenue for the year was unchanged underlying with account rationalisation and the termination of our Russian franchise operation (closing five franchise stores as we move to direct operation) offsetting growth from key strategic accounts.

 

Americas

We continued to refine our wholesale presence in the Americas with the conversion of the Holt Renfrew business in Canada to retail concessions in February 2014 and the withdrawal of menswear from brand inappropriate locations in the United States.  Excluding these factors, there was mid single-digit percentage growth underlying, with a strong brand performance on our wholesale partners' digital commerce sites.

 

Beauty

Beauty wholesale revenue increased by 25% underlying, in line with guidance (up 21% at reported FX).  My Burberry, our iconic womens fragrance, was successfully launched in September.  The marketing campaign also featured our heritage trench coats, providing a halo benefit to the wider business and further reinforcing the brand message.

 

 

Licensing

3% of revenue (2014: 3%); of which about 80% is from Japan, with the balance from global product licences (eyewear and watches) and European wholesale childrenswear

 

·    Licensing revenue unchanged underlying, down 14% at reported FX

·    In line with full year guidance

 

Royalty income from Japan was £53m, broadly unchanged year-on-year underlying.  Income from the main apparel licence increased slightly reflecting higher minimum payments, offset by the planned downsizing of the remaining short-term licences.

 

Combined, income from eyewear and watches was broadly unchanged underlying, reflecting phasing and the elevation of watch distribution.  The launch of the Trench eyewear collection in September, planned to coincide with the My Burberry and heritage launch, was our most successful to date.

 

Operating profit analysis

 

Adjusted operating profit

 

	Year to 31 March			% change
£ million	2015	2014		reported FX	underlying
Retail/wholesale	399.2	393.5		1	8
Licensing	56.0	66.8		(16)	1
Adjusted operating profit	455.2	460.3		(1)	7
Adjusted operating margin	18.0%	19.8%

Adjusted operating profit increased by 7% underlying, down 1% at reported FX, including a £38m adverse exchange rate impact.

 

Adjusted retail/wholesale operating profit 

 

	Year to 31 March			% change
£ million	2015	2014		reported FX
Revenue	2,455.5	2,250.6		9
Cost of sales	(757.7)	(671.3)		(13)
Gross margin	1,697.8	1,579.3		8
Gross margin	69.2%	70.2%
Operating expenses	(1,298.6)	(1,185.8)		(10)
Adjusted operating profit	399.2	393.5		1
Operating expenses as % of revenue	52.9%	52.7%
Adjusted operating margin	16.3%	17.5%

Adjusted retail/wholesale operating profit was £399m in FY 2015, up 8% at constant exchange rates and 1% at reported FX.  The adverse impact of exchange rate movements reduced revenue by £60m and profit by £26m in the year.  Operating margin was 16.3%, or 16.9% at constant exchange rates.

 

Gross margin was 69.2%, down 100 basis points. This reflects the negative impact of exchange rate movements, the one-off inventory cost discussed at the interim results relating to a previous fragrance launch, as well as various mix and other factors, including an adverse regional mix shift in the second half, reflecting the slowdown in Hong Kong, a high margin market.

 

The operating expense to sales ratio was 52.9%, up 20 basis points compared to the prior year.  A modest benefit from operating leverage and tight cost control was more than offset by the adverse impact of exchange rate movements.  About half of the underlying absolute increase in expenses came from general inflation and net new space, with the balance including volume-related costs and increased investment in areas such as marketing and technology, which supported revenue growth.

 

 

Licensing operating profit

 

	Year to 31 March			% change
£ million	2015	2014		reported FX
Revenue	67.7	79.2		(14)
Cost of sales	-	-		-
Gross margin	67.7	79.2		(14)
Gross margin	100%	100%
Operating expenses	(11.7)	(12.4)		6
Operating profit	56.0	66.8		(16)
Operating margin	82.7%	84.3%

 

 

The effective yen rate moved from £1:Yen137 in FY 2014 to £1:Yen164 in FY 2015, reducing reported licensing operating profit by £11.5m.  With a small decrease in allocated operating expenses, licensing profit was £56.0m, broadly unchanged underlying, down 16% at reported FX.

 

 

Adjusting items

 

	Year to 31 March
£ million	2015	2014
Amortisation of fragrance and beauty licence intangible	(14.9)	(14.9)
China put option liability finance income/(charge)	3.7	(1.7)
	(11.2)	(16.6)

 

 

The charge of £14.9m relates to the amortisation of the fragrance and beauty licence intangible asset of £70.9m, which was recognised in FY 2013.  This asset will be amortised on a straight line basis over the period 1 April 2013 to 31 December 2017.

 

The China put option liability finance income of £3.7m relates to fair value movements, including the discount unwind, on the put option liability over the non-controlling interest in the acquired Chinese business.   

 

Taxation

The tax rate on adjusted profit in FY 2015 was 23.4% (2014: 24.7%), largely reflecting the lower UK corporation tax rate. 

 

The tax charge of £103.5m (2014: £112.1m) resulted in an effective tax rate on reported profit of 23.3% (2014: 25.2%).  Tax on exceptional items has been recognised as appropriate.   

 

Net cash

Cash generated from operating activities was £568m, 6% higher than last year, reflecting tight control of working capital.  Capital expenditure was £156m, lower than guidance, largely reflecting the phasing of new projects.  Other major outflows were tax of £114m and dividends of £145m. 

 

Net cash at 31 March 2015 was £552m, an increase of £150m year-on-year.  

Taking into account our lease commitments, our lease-adjusted net debt, which we calculate as five times the annual minimum lease charge less net cash, increased slightly during the year to £402m (2014: £380m).  At constant exchange rates, inventory was broadly unchanged year-on-year, compared to 14% retail and 6% wholesale revenue growth.  Inventory at 31 March 2015 was £437m (2014: £420m).  

 

Outlook 

Retail:  In FY 2016, net new space is expected to contribute low single-digit percentage growth to total retail revenue, with 15-20 mainline store openings and a similar number of closures. 

 

Wholesale:  Burberry expects total wholesale revenue at constant exchange rates to be broadly unchanged in the six months to 30 September 2015 (2014: £317m).  Excluding Beauty, we expect wholesale revenue to be down by a low single-digit percentage.  For Beauty, wholesale revenue in FY 2016 is expected to grow by 10-15% at constant exchange rates, with additional contributions from retail and digital channels.

 

Retail/wholesale profit:  In FY 2016, if exchange rates* remain at current levels, our latest expectations for FY 2016 reported retail/wholesale profit would be about £10m higher than at FY 2015 rates.  This is a decrease of about £40m since the guidance given at the Second Half Trading Update in April 2015, reflecting the movement in exchange rates. 

 

For FY 2016 retail/wholesale operating margin, we currently expect the benefit from FX and tight cost control to be offset by geographic and channel mix and continued investment in the business. 

 

Licensing:  Total licensing revenue for FY 2016 is planned to be down by about 40% at constant exchange rates (2015: £68m), due to the expiry of the Japanese licences.  For FY 2016, we expect double-digit percentage growth from the global product licences and about £25m revenue from Japan, as previously guided.  The latter comprises income from the existing licences, including the orderly transition and exit of local licensed product and the first income from the new Blue/Black Label licence. 

 

At current exchange rates*, the impact of the movement in the sterling/yen rate on reported licensing revenue in FY 2016 is not expected to be material.

 

Group adjusted PBT:  In FY 2016, we expect group adjusted PBT at constant exchange rates to be more second-half weighted than in FY 2015.

 

Tax rate:  The tax rate on adjusted profit for FY 2016 is currently expected to be about 23%.

 

Capital expenditure:  Spend of about £180m is planned in FY 2016.

 

 

* Effective rates as at 14 May 2015, taking into account the current hedged positions

 

 

 

APPENDIX

 

Exchange rates

 

	Effective rates for FY 2016			Average exchange rates
£1=	14 May 2015	31 March 2015		FY 2015	FY 2014
Euro	1.39	1.38		1.28	1.19
US Dollar	1.57	1.48		1.60	1.59
Chinese Yuan Renminbi	9.73	9.21		9.94	9.78
Hong Kong Dollar	12.17	11.51		12.42	12.38
Korean Won	1,711	1,646		1,709	1,734
Yen*	176	176		164	137

 

* Taking into account the hedged positions

 

 

Retail/wholesale revenue by destination

 

	Year to 31 March			% change
£ million	2015	2014		reported FX	underlying
Asia Pacific	938.1	870.3		8	9
EMEIA	869.0	811.5		7	12
Americas	648.4	568.8		14	16
	2,455.5	2,250.6		9	12

 

 

Retail/wholesale revenue by product division

 

	Year to 31 March			% change
£ million	2015	2014		reported FX	underlying
Accessories	892.5	816.1		9	12
Womens	743.0	684.0		9	11
Mens	557.5	520.8		7	10
Childrens	77.7	78.4		(1)	1
Beauty*	184.8	151.3		22	26
	2,455.5	2,250.6		9	12

 

* FY 2015 Beauty revenue is £174.7m of wholesale revenue and £10.1m in retail (2014: £144.1m; £7.2m)

 

 

Store portfolio

 

	Directly-operated stores
	Stores	Concessions	Outlets	Total	Franchise stores
At 31 March 2014	215	227	55	497	70
Additions	16	12	3	31	5
Closures	(17)	(26)	(1)	(44)	(8)
At 31 March 2015	214	213	57	484	67

 

 

 

Store portfolio by region

 

	Directly-operated stores
At 31 March 2015	Stores	Concessions	Outlets	Total	Franchise stores
Asia Pacific	63	143	13	219	12
EMEIA	73	62	24	159	49
Americas	78	8	20	106	6
Total	214	213	57	484	67

 

 

 

Group Income Statement

		Note	Year to 31 March 2015 £m	Year to 31 March 2014 £m
	Continuing operations
	Revenue	4	2,523.2	2,329.8
	Cost of sales		(757.7)	(671.3)
	Gross profit		1,765.5	1,658.5
	Net operating expenses	5	(1,325.2)	(1,213.1)
	Operating profit		440.3	445.4
	Financing
	Finance income		4.4	3.9
	Finance expense		(3.8)	(3.2)
	Other financing income/(charges)		3.7	(1.7)
	Net finance income/(charge)	8	4.3	(1.0)
	Profit before taxation	6	444.6	444.4
	Taxation	9	(103.5)	(112.1)
	Profit for the year		341.1	332.3
	Attributable to:
	Owners of the Company		336.3	322.5
	Non-controlling interest		4.8	9.8
	Profit for the year		341.1	332.3
	Earnings per share
	Basic	10	76.4p	73.6p
	Diluted	10	75.1p	72.1p
			£m	£m
	Reconciliation of adjusted profit before taxation:
	Profit before taxation		444.6	444.4
	Adjusting items:
	Amortisation of the fragrance and beauty licence intangible in operating expenses	7	14.9	14.9
	Put option liability finance (income)/charge	7	(3.7)	1.7
	Adjusted profit before taxation - non-GAAP measure		455.8	461.0
	Adjusted earnings per share - non-GAAP measure
	Basic	10	78.3p	77.0p
	Diluted	10	76.9p	75.4p
	Dividends per share
	Interim	11	9.70p	8.80p
	Proposed final (not recognised as a liability at 31 March)	11	25.50p	23.20p