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www.burberry.com
Annual report 2010/11
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www.burberry.com
burberry
An iconic british luxury
brand established in 1856
leverages its rich heritage,
proven strategies and
talented team to assure
sustainable, profitable
growth on a global scale
Contents
Financial highlights
4
8 Chairman’s letter
12 Chief Executive Officer’s letter
18 Executive team
22 Burberry Group overview
28 Strategy
44 Business and financial review
54 Risk
58 Corporate responsibility
66 Board of Directors
68 Directors’ Report
71 Corporate governance
76 Directors’ Remuneration Report
86 Statement of directors’ responsibilities
87 Independent auditors’ report to the members of Burberry Group plc
88 Group income statement
89 Group statement of comprehensive income
90 Group balance sheet
91 Group statement of changes in equity
92 Group statement of cash flows
93 Notes to the financial statements
133 Five year summary
135 Independent auditors’ report to the members of Burberry Group plc
136 Company balance sheet
137 Notes to the Company financial statements
141 Shareholder information
143 Executive team
1
FINANCIAL HIGHLIGHTS
DELIVERING RECORD PROFITS
1,501
1,185
1,280
1,202
995
850
962
710
749
630
484
410
441
377
434
489
426
354
1501
962
489
Retail
64%
Wholesale 29%
7%
Licensing
Total revenue (Year to March)
£1,501m
11
10
10*
09
08
07
0
Retail revenue (Year to March)
£962m
11
10
10*
09
08
07
0
Wholesale revenue (Year to March)
£441m
11
10
10*
09
08
07
0
Revenue by channel in 2010/11
4
Adjusted operating profit (Year to March)
£301.1m
11
10
10*
09
08
07
0.000000
Adjusted operating profit is stated before exceptional items
Reported operating profit £302.1m (2010: £216.5m)
Net cash/(debt) (As at 31 March 2011)
£297.9m
11
10
09
08
07
301.100006
0.000000
297.899994
Adjusted diluted earnings per share (Year to March)
48.9p
11
10
10*
09
08
07
0.000000
Adjusted diluted EPS is stated before exceptional items
Reported diluted EPS 46.9p (2010: 18.4p)
Dividend per share (Year to March)
20.0p
11
10
09
08
07
0
48.900002
20
301.1
219.9
219.9
180.8
206.2
185.1
297.9
262.0
7.6
(64.2)
(2.8)
48.9
35.1
35.1
30.2
31.6
29.1
20.0
14.0
12.0
12.0
10.5
2007-2009 and 2010* include the results of the discontinued Spanish operations. 2010 has been
represented to exclude the discontinued Spanish operations.
5
CHAIRMAN’S LETTER
growth on this scale would not have been possible. In
financial terms, disciplined execution of these strategies
over the five year period has resulted in Burberry’s 102%
revenue growth and 82% increase in operating profit, with
core retail/wholesale operating profit increasing 128% on a
112% revenue gain. This notwithstanding a financial crisis
in mid-course.
The five year financial profile is capped by the record
2010/11 performance. Total revenue grew 27% to
£1,501m, a 24% gain at constant exchange rates.
Operating profit increased 37% to £301.1m, achieving an
historical high 15.6% retail/wholesale operating margin.
Diluted EPS reached 48.9p, a 39% gain. After-tax return
on capital, at 35%, remained strong. All of these figures are
on an adjusted basis, and exclude the impact of the now
discontinued legacy business in Spain. The Group ended
the year with a £298m net cash balance. The Board has
recommended a 43% increase in the full year dividend
to 20.0p.
Looking ahead. While on a secular basis, underlying trends
contributing to luxury growth – wealth creation, rise of
growth market consumers, continuing consumer interest –
appear favourable, the global macro environment suggests
some reserve.
Although Burberry was among the leading performers
in the sector during 2010/11, a strong rebound in luxury
spending on the heels of recession lifted most participants.
Despite some healthy headline forecasts, the current
climate includes distinct uncertainties – record fiscal
deficits in advanced economies, rising inflation in high
growth economies and record commodity prices for
all. Political tensions in sensitive areas of the world also
present potential challenges. In short, the macro backdrop
may not be as favourable in 2011/12.
Near-term factors aside, the Board’s optimism for
Burberry’s future remains in full. The Group possesses a
clear and well executed strategy, world-class management
and design teams and a strong financial profile, further
enabled by a powerful culture capable of executing under
a range of market conditions. And the brand operates in
attractive markets with specific opportunities across the
spectrum. Burberry’s results for the year and across this
volatile five year period clearly demonstrate these qualities.
On behalf of the Board and shareholders, I thank the team
around the world for their contributions to these excellent
results, and look forward to Burberry’s further progress.
John Peace, Chairman
An historic year for Burberry – record revenue, margin and
profit. These results reflect not only the most recent year’s
effort, but five years of endeavour by this team.
The five key strategies, outlined further in this report, have
been executed with lasting effect on the business and
business model. In terms of status, the Burberry brand
has clearly solidified its unique democratic positioning
within the luxury arena. Retail, the channel which
maximises the brand’s ability to manage consumer
perception, has become the primary route of distribution,
moving from 43% of total revenue in 2005/06 to 64% in
2010/11 (greater adjusting for full China integration) –
while licensing activities have been largely confined to
three global categories and Japan, with the foundation set
for future integration of the brand’s business in that market.
Burberry has also gained share across geographies, in
both developed markets such as the US and high growth
economies like the Middle East. Work in Asia, most
recently the acquisition of the brand’s store network in
China, has positioned Burberry well in this high growth
luxury region. In line with the strategy, attractive non-
apparel categories have been intensified, accounting for
40% of retail/wholesale revenue in 2010/11 relative to 29%
in 2005/06. Lastly, through a range of initiatives, including
development of an integrated supply chain and SAP
implementation throughout the majority of the business,
operational capability has been upgraded substantially.
Without this investment in infrastructure and expertise,
8
9
Chief executive officer’s letter
At the most fundamental level, management’s primary
objectives are the continued development of the Burberry
brand and delivering sustained, profitable growth over
the long term. These objectives are addressed through
a precise vision for the Group, a consistent strategy and
a distinctive set of values. Although the global recession of
2008-2009 slowed progress in some respects, we did not
compromise pursuit of either objective. With an improving
external environment in 2010/11, the team capitalised
on the expertise and infrastructure developed during
preceding years and the Group’s strong financial position
to accelerate investment in the brand and reassert the
strategic growth agenda.
Brand Investment
We have long held that great brands project a pure,
consistent experience across all channels in order to
standout in today’s cluttered consumer arena. Sharp
definition communicates the point of difference and
informs consumer choice, while also conveying authenticity
and integrity, which are vitally important to a heritage brand
such as Burberry. A pure brand image captures mindshare.
Further, globally pervasive digital technology is altering
consumers’ relationships with brands – both expectations
of, and ways of interacting with, them. Digital’s capabilities
of movement, sound, information capacity and
self-navigation allow for an all-encompassing emotive
brand experience, which can be achieved anywhere –
not confined to a brand’s physical environment, such
as a retail store. The technology has raised consumers’
expectations for a voice in, and greater access to, the
brand. Consumers also increasingly expect transparency
and clarity with respect to the company behind the brand.
• Burberry World launch. In line with these principles,
the Group launched Burberry World – a website
providing the complete expression of the Burberry
brand, as well as full e-commerce capability – in the
final quarter of 2010/11. Burberry World offers access
to the brand’s defining features, including heritage
and archival imagery, behind-the-scenes footage of
key events, such as runway shows and photo shoots,
philanthropic activity and comprehensive product views
and information – the site contains the most complete
product assortment available for purchase anywhere.
Burberry World also connects the broader Burberry
community through Burberry Acoustic – a site featuring
music and videos from emerging British artists – and
12
artofthetrench.com, our social media site allowing
members to explore and share experiences of the iconic
trench coat. Beyond simply delivering an on-brand
interface online, our goal is to provide the perfect,
complete Burberry experience. We are also reorienting
other consumer-related activity, including retail stores,
for multi-channel connectivity – however a consumer
engages with the brand, the experience should be
consistent. In terms of its direct commerce implications,
we expect Burberry World to drive sales across all
channels – digital (currently transactional in 45 countries
and six languages), retail, wholesale and licences –
through long-term consumer engagement and direct
merchandise access and information. Achieved through
substantial investment, this global platform is the focal
point for the brand.
• Correcting legacy issues. Although great progress
has been made in revitalising the Burberry brand over
the last decade, inconsistencies with the modern
democratic luxury positioning remain. During the year,
the Group intensified investment in correcting these
legacy brand issues. In retail, while the outlet store
format is primarily an inventory management tool, parts
of the portfolio are not appropriately aligned with the
brand; as a result, several outlet stores were closed
in the year, as others were upgraded, renovated and
expanded. In the wholesale channel, management
is concentrating distribution in fewer doors, those
consistent with the brand’s status, and improving
in-store presentation through several initiatives,
including an emphasis on dedicated real estate. In the
licensing arena, the year saw the impact of the Japan
leather goods licence termination, as part of the multi-
year process to align that market with the global brand.
Finally, with the Spring/Summer 2011 season, Burberry
largely completed the local-to-global product transition
in Spain. Each of these activities was undertaken
at a significant cost to earnings, which will only be
recaptured over time through greater brand vitality. The
Group will continue to take similar action to purify brand
presence in the seasons ahead.
Reasserting the Growth Agenda
Confident in the long-term potential of the Burberry brand
and our design, marketing and retail-led business, we
reasserted the strategic growth agenda as the world
began to emerge from recession.
• China acquisition. In September, Burberry acquired
its store network in China from a longstanding franchise
partner for approximately £65m. China is the most
exciting luxury market in the world today, whether
defined by current size, growth rate or long-term
potential. Already estimated to be the fourth largest
luxury customer group globally, the Chinese consumer
is projected to be the most important sector growth
driver both domestically and internationally over at
least the next few years. In addition to the transaction,
under which the Group acquired 50 stores, the local
team opened an additional net seven stores during
the year. Since acquisition, the stores have achieved
approximately 30% sales gains on a year-over-year
basis. Burberry is well positioned in this market,
and the acquisition is a key growth platform for the
brand’s future.
• Retail expansion. Retail investment accelerated with a
62% increase in store-related capital expenditure during
the year. Average space expanded 9%, excluding the
China acquisition, led by 28 mainline store additions,
many of which were clustered in high potential markets.
Investments included flagship stores in new markets,
including Beijing and Sydney – the first flagships in
China and Australia – as well as established markets
such as London, Milan and Paris. Store renovation
activity also intensified to ensure the entire portfolio
keeps pace with the brand’s aspirations and digital
presentation standards; major projects included
Las Vegas and Boston.
• Marketing in the digital dimension. Marketing efforts
enlarging the brand’s digital dimension also intensified
in 2010/11. With digital content becoming a primary
vehicle to communicate brand identity and engage
consumers, we continued to invest in content, both in
terms of creation capability and volume. An expanded
team of digital experts develops rich bodies of
consumer-oriented content around any brand activity –
the traditional still images of Burberry’s main advertising
campaigns are now accompanied by sets of video
13
Chief executive officer’s letter continued
stories, while simple product shots have become video
clips. A local fashion show or store opening becomes
a global event through live-streamed production.
Digital innovations, such as virtual trunk shows,
which allow runway show viewers to select items for
immediate purchase, further immerse consumers in
the brand. To extend consumer reach, Burberry works
with leading digital media companies to distribute this
exciting content across their platforms. The Group
has also increased digital marketing investment through
greater use of email and online advertising. During
the year, the brand deepened engagement with its
social media communities – including the proprietary
artofthetrench.com – through the addition of dedicated
content and more frequent interaction. With almost five
million fans (at 31 March), Burberry is the leading luxury
brand on Facebook. Burberry has achieved a leadership
position within the luxury sector in the digital marketing
arena, and will continue to invest substantially in these
activities. Referencing these and related initiatives,
Fast Company magazine named Burberry to its 2011
list of the world’s 50 most innovative companies.
• Product intensification. In the product arena,
Burberry directed investment to both core and young
categories. To drive innovation in the core women’s and
men’s outerwear and large leather goods categories,
the design and merchandising teams explored a
wider range of exotic and luxury materials, pursued
technical innovation and broadened the highest fashion
components of the lines. The teams also reoriented
development processes around creating distinct
monthly product capsules to ensure a continuous flow
of new and compelling merchandise to stores. The
Group continued to invest in replenishment capability
with the goal of constant availability of continuity core
product at retail. Looking at young businesses, the
childrenswear operations, previously located in Spain,
were integrated with the London-based product
divisions, with additional resource commitment in
design and merchandising. The underdeveloped
women’s shoe category benefitted from similar resource
intensification, as well as assortment expansion and
greater space allocation within our store network,
where sales growth accelerated in the year.
• New market investment. Investment in new markets
also accelerated. Burberry launched its Latin America
strategy with a dedicated regional management team
and headquarters located in São Paulo, Brazil. The
team opened stores in Brasilia, São Paulo and Puebla,
Mexico during the year. Looking east, the Group further
developed its joint operation to capitalise on the rapidly
growing consumer economy in India. Burberry now
has five stores in this exciting market. Although in the
near term these operations incur significant start-up
expenses, we expect them to contribute meaningfully
to future profit growth. In addition, through franchise
partners, the Group entered four new markets in
2010/11, including Egypt and Mongolia.
• Infrastructure investment. Reasserting the growth
agenda required continued evolution and investment in
infrastructure – finance, information technology, human
resources, legal. Across the agenda – from disciplined
management of replenishment inventory to producing
digital events to meeting the structural requirements
of new markets – these resources enabled and
contributed to growth in the year.
Culture and values
Alongside brand and growth, we continued to invest in our
culture. As a team, we look to reinforce a company culture
characterised by
• Shared vision for the future of brand and business
• Democratic and meritocratic ethos
• Connected, collaborative style of interaction
• Focus on the Burberry brand as the touchstone against
which all activity is measured
These principles relate directly to the brand’s core values:
to protect, explore and inspire. Investing (both mental
and financial resources) in this culture encompasses a
broad range of initiatives, from communication activities to
compensation structures and other employee benefits to
encouraging performance standards – which also extend
beyond the organisation to our partners. These uniting
cultural forces, along with our passion, emotion and
conviction, are as important to Burberry’s success as the
five strategic themes. Though a commercial enabler, this
culture equally defines the type of community we believe
in, and the type of company we want to be.
14
Growth in adjusted diluted EPS
is a key valuation metric for Burberry’s shareholders
48.9P in 2010/11 +39%
11
10
10*
09
08
07
48.9
35.1
35.1
30.2
31.6
29.1
+39%
+16%
-4%
+9%
+21%
2007-2009 and 2010* include the result of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
Record financial results
In addition to investing for the future, the team continued
to execute, achieving record revenue and profit in the year.
Revenue increased 27% to £1,501m. An 11% comparable
store sales gain combined with 9% space expansion and
a 12% contribution from China to produce 36% retail
revenue growth (22% excluding the China acquisition) to
£962m. Wholesale revenue increased 17% (26% ex-China)
to £441m. Licensing revenue was marginally ahead with
the effect of terminated Japan and apparel licences offset
by strength across global licences and currency gains.
Under the single brand, the Group is a well balanced
portfolio of businesses – balanced diversity within each
of product, channel and region. With the exception of
the Japan licences, all parts of this portfolio performed
well in the year. Adjusted operating profit increased 37%
to £301m with adjusted retail/wholesale operating profit
growing 59% on a 29% revenue gain – achieving an
historical high 15.6% adjusted retail/wholesale operating
margin. Notwithstanding the substantial investment,
the Group ended the year with net cash of £298m.
Looking ahead
In summary, it’s been an historic year for the Group,
the result of a united effort of employees, suppliers,
customers and licensing and franchise partners. We thank
this extended team for their commitment and partnership.
Turning to 2011/12, although the external environment
may be less certain, we look forward with optimism.
The brand is well positioned, the strategies are effective,
the team is united and the consumer engaged. We will
continue to invest to realise the potential of this great
brand and business.
Angela Ahrendts, Chief Executive Officer
15
EXECUTIVE TEAM
ACHIEVING balance through
Experience and talent
18
19
BURBERRY GROUP OVERVIEW
A diversified business model
Burberry is a global luxury brand with a distinctive British heritage, core outerwear and large leather goods base,
and some of the most recognised icons in the world. Burberry designs and sources apparel and accessories,
selling through a diversified network of retail, digital, wholesale and licensing channels worldwide.
The business is managed by channel, region and product, supported by corporate functions.
Evolving channel mix
Burberry sells its products to the end consumer through both retail (including digital commerce) and wholesale channels.
For 2010/11, retail accounted for 64% of revenue and wholesale 29%. Burberry also has licensing agreements in Japan
and globally, leveraging the local and technical expertise of its licence partners.
Revenue by channel
Excluding the results of the discontinued Spanish operations. Underlying is calculated at constant exchange rates.
64%
29%
7%
Retail
Includes 174 mainline stores, 199
concessions within department stores
and 44 outlets, as well as digital commerce
around the world
• 32% underlying growth (20% excluding
impact of China acquisition)
• 11% comparable store growth
• Net 26 mainline store openings
in the year, including Beijing,
São Paulo and Mumbai
Wholesale
Includes sales to department stores,
multi-brand specialty accounts and Travel
Retail, as well as sales to its franchisees
who operate 56 Burberry stores, mainly
in Emerging Markets
Licensing
Includes royalty income received from
Burberry’s licensees in Japan, its global
licensees for fragrance, eyewear and
timepieces, and a small European
childrenswear licensee
• 16% underlying growth
(25% excluding impact of
China acquisition)
• Strength from Asia Pacific and the
Americas, particularly Asia Travel Retail
and US department stores
• Entered four new markets with
franchise partners (Armenia, Egypt,
Israel and Mongolia)
• 4% underlying decline
• Growth in global product licences offset
by termination of Japanese leather goods
licence in 2010 and the final regional
menswear licences
• Greater integration between
strategy, product development
and digital marketing
22
Broad geographic portfolio
Burberry operates in four regions: Europe, Asia Pacific, Americas and Rest of World.
Retail and wholesale revenue by destination
Excluding the results of the discontinued Spanish operations. Underlying is calculated at constant exchange rates.
27%
34%
33%
6%
Americas
Europe
Asia Pacific
Rest of World
Includes US, Canada,
Central and South America
Excluding the results of the
discontinued Spanish operations
Includes China and the Japanese
non-apparel joint operation
• Up 16% underlying
• Up 15% underlying
• Up 53% underlying
• Good progress in US
• Double-digit comparable
• China acquisition completed
wholesale; expansion of real
estate in department stores
• Three store openings in
Latin America (Brasilia and
São Paulo, Brazil and
Puebla, Mexico)
store sales growth; first Brit
trial store in Europe opened
in Milan
– acquired stores comparable
growth about 30% in the
second half
• Continued focus on key
• Flagship store opened
department store customers
and rationalisation of small,
non brand-enhancing speciality
accounts in wholesale
in Beijing
• Up 43% underlying
•
Indian joint operation opened
three stores in Delhi, Mumbai
and Hyderabad
• Burberry Middle East opened
first two department store
concessions in Harvey
Nichols and Bloomingdales
23
BURBERRY GROUP OVERVIEW CONTINUED
pRODUCTS
Within the Burberry offering, there is a product
hierarchy – each collection with unique branding
and a distinct Burberry identity.
At the top is Burberry Prorsum, the most fashion
forward collection centred around catwalk/
runway shows each year. Prorsum, the Latin
word for ‘moves forward’, provides the design
inspiration for the brand.
In the centre of the pyramid is Burberry London
– or what a customer wears on weekdays for
work (tailored ready to wear).
And at the base of the pyramid is Burberry
Brit – what a customer wears on the weekend
(casual wear), including Burberry Sport.
Collections are distinctly designed and
merchandised across the pyramid to drive the
brand’s revenue and profitability. Outerwear
and non-apparel span all levels as Burberry
continues to innovate and diversify these
core categories.
Diversified offering
Retail and wholesale revenue by product
Excluding the results of the discontinued Spanish operations.
BURBERRY
PRORSUM
BURBERRY
LONDON
BURBERRY
BRIT
40%
33%
23%
4%
Non-apparel
• Up 32% underlying
Womenswear
• Up 21% underlying
Menswear
• Up 29% underlying
Childrenswear
• Up 23% underlying
• Large leather goods
(handbags) about half
of revenue
• Small leather goods and
scarves outperformed
• About 60% is outerwear;
Prorsum and London
collections outperformed
• Growth balanced between
continued innovation
and replenishment
• About 40% is outerwear;
Prorsum and London
collections outperformed
• Spring/Summer 2011
first season managed by
London-based team
• Spring/Summer 2011 the
first collection designed
entirely in-house
• Foundation built from
men’s and women’s
proven strategies
24
STRATEGY
BRAND AND BUSINESS
From its founding in 1856, Burberry has become the leading British luxury brand globally.
The brand is defined by:
The business is driven by:
The culture is distinguished by:
• Britishness
• Authentic outerwear heritage
• Historic icons: the trench coat,
trademark check and Prorsum
knight logo
• Democratic luxury positioning
• Innovation and intuition
• Design, marketing and
retail-led strategies
• Core values: to protect,
explore and inspire
• Digital focus and integration
• Democratic and meritocratic
• Channel diversity: retail,
ethos
digital commerce, wholesale
and licensing
• Collaboration and
connectedness
• Multi-category competency:
non-apparel, womenswear,
menswear and childrenswear
• Global reach and balance:
across core regions and
emerging markets
• Contributing to its communities,
including through the
Burberry Foundation
Unified and passionate teams are responsible for maintaining the integrity and vitality of this extraordinary brand while
continuing to develop a business which remains relevant to ever-evolving markets and consumer tastes. The following
pages outline the Group’s strategy under each of its five key themes.
oUR STRATEGIc ThEmES
LEvERAGING
ThE
fRANchISE
INTENSIfYING
NoN-AppAREL
DEvELopmENT
AccELERATING
RETAIL-LED
GRowTh
INvESTING
IN UNDER-
pENETRATED
mARkETS
pURSUING
opERATIoNAL
ExcELLENcE
28
STRATEGY coNTINUED
LEvERAGING ThE fRANchISE
Through more coordinated use of brand assets and greater integration of its global organisation, Burberry has
the opportunity to enhance consumer responsiveness and operate more efficiently and effectively. This potential
lies both in the front and back-of-house operations.
• Continued transformation of fashion shows
Burberry continued to break new ground in the reach
and impact of its fashion shows. Previously closed
door events for invited guests, the use of livestream
technology allowed Burberry to take these key brand
moments to an ever-wider audience over the course of
the year, culminating with the livestream of the Burberry
Spring/Summer 2011 womenswear show, which has
been watched by over one million people across more
than 180 countries around the world. The introduction
of ‘retail theatre’ technology allowed the livestreaming
of shows directly to flagship stores globally, while the
development of instant digital commerce purchase
capability, supported by supply chain innovation, has
allowed customers for the first time to buy directly
from the runway for delivery in seven weeks. Further
innovations, such as the streaming of the September
2010 womenswear show in 3D to five locations around
the world, and the hosting of the Autumn/Winter 2011
womenswear show on the iconic video screens in
Piccadilly Circus, London, have continued to broaden
reach and awareness.
• Further digitisation of the brand
Continued investment and an intense focus on
infrastructure development meant the Group was able
to accelerate the digitisation of the brand. In 2010/11,
the Group further bolstered its world-class creative
and IT teams to remain at the forefront of innovation
and excellence in the creation and distribution of
digital assets.
In 2010/11 Burberry was again included in Interbrand’s
Top 100 Global Brands; was awarded the 2010 British
Graduate 100 Award for ‘Where Fashion Graduates Want
to Work’; and was recognised as the 13th most innovative
company in the world by Fast Company magazine, as well
as receiving the Inaugural Innovation Award at the 2010
British Fashion Awards.
Product and marketing excellence underpin this brand
momentum. Key highlights in 2010/11 include:
Marketing innovation
• Launched new Burberry.com site
The rollout of the new Burberry.com website began
in the fourth quarter of 2010/11, with the site live in
six languages and transactional across 45 countries
by the year end. The site, known as Burberry World, is
the ultimate expression of the Burberry brand, allowing
customers globally – in many cases for the first time –
to connect with all its aspects, from heritage, to music
and video, to the full product offer. Through the use of
dynamic audiovisual content the site becomes a place
to engage, entertain and interact, as well as providing
the ultimate online luxury shopping experience through
a personalised customer service offer that includes the
ability to Click to Chat and Click to Call in real time and
in 14 languages. The site provides a powerful locus
for ongoing efforts to build the Burberry community
around the world.
• Extended luxury leadership position in social media
Engaging with social media is a further critical part
of the Group’s strategy to connect customers with
the Burberry brand. In 2010/11, Burberry further built
its leadership position amongst luxury brands on
Facebook, ending the year with approaching five million
fans, as well as almost 200,000 followers on Twitter
and over four million channel views on YouTube. A key
milestone in late 2010/11 was the launch of the brand
on Chinese social media sites Sina Weibo, Kaixin001,
Douban and YouKu, having launched country-specific
Twitter accounts in Brazil, Mexico, Japan, Turkey and
Korea earlier in the year. The Group’s own social media
site, artofthetrench.com, continued to inspire people
around the world and across generations to share their
experiences of the iconic trench coat. By the end of the
year, the site had received more than 11 million page
views since its launch in November 2009.
30
STRATEGY coNTINUED
LEvERAGING ThE fRANchISE coNTINUED
Product excellence
• Further built childrenswear
• Key apparel categories outperformance
Outerwear remains the core of the Burberry apparel
business, from timeless iconic pieces to innovative
contemporary styles. A key growth driver, outerwear
accounted for over half of mainline retail apparel sales
in the year. At the top end of the pyramid, fashion
outerwear drove outperformance from Prorsum,
the runway collection that creates the halo for the
entire Burberry brand.
• Integrated menswear
SS11 saw the launch of the first fully in-house global
menswear collection. Historically a licensed business,
the Group exited all 11 licences between 2006/07
and 2010/11, enabling the relaunch and repositioning
of this category. This first pure collection drove
outperformance in menswear during the year,
with reported growth of 31%.
Building childrenswear remains a key focus for
the Group. Childrenswear was formally integrated
into the global business in 2010/11, with the division
now located in the Group’s London headquarters
and its product aligned with core design and
merchandising strategies.
2010/11 also saw the intensification of ongoing efforts
to correct those legacy issues that are inconsistent with
the global luxury positioning of the Burberry brand.
A key focus of this effort has been to upgrade the
brand positioning with wholesale partners. A number
of Japanese non-apparel licences were also terminated
during the year and the restructuring and transformation
of the Spanish business were succesfully completed,
with the global collection rolled out across all channels
for the first time from SS11.
measuring our progress
Total revenue growth (Year to March) – measures the appeal of the
brand to consumers, be it through Burberry stores or those of its
department store or specialty retail customers.
£1,501m in 2010/11 +24%
11
10
10*
09
08
07
1,501
1,185
1,280
1,202
995
850
+24%
+1%
+7%
+18%
+15%
Retail
Wholesale
Licensing
Growth rate is year-on-year underlying change i.e. at constant exchange rates.
2007-2009 and 2010* include the result of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
In 2010/11, Burberry’s revenue was £1,501m – a 24% underlying
increase on the previous year. China, which transferred from
wholesale to retail on 1 September 2010 following the acquisition
of the former franchisees’ operations, contributed 5% to this
underlying growth.
32
STRATEGY coNTINUED
INTENSIfYING NoN-AppAREL DEvELopmENT
Intensify and focus on under-penetrated non-apparel categories to leverage further Burberry design and merchandising
expertise and iconic branding through investment in product development, marketing and supply chain.
Licensing
• Beauty
In June 2010, the Group launched its first cosmetics
line, Burberry Beauty, with its fragrance licensee
Interparfums. Reinforcing the brand’s core trench
and outerwear heritage through its focus on natural,
effortless beauty, Burberry Beauty was first introduced
as a test format through a limited number of wholesale
partners globally and later directly to customers on
burberry.com. Supported by digital assets and used in
all Burberry advertising campaigns and runway shows,
Burberry Beauty is enjoying a strong early response
from consumers and press as it approaches its
first anniversary.
• Global licences
Burberry has three global licensing agreements:
fragrance (Interparfums), timepieces (Fossil) and
eyewear (Luxottica). During the year, Burberry
strengthened its organisation to manage these
relationships more intensively, more closely aligning
strategies to unlock the potential of licensed products
in line with owned categories.
Non-apparel remains a key driver of growth, contributing
40% of retail/wholesale sales during the year. In 2010/11
it was again the Group’s fastest growing product category.
• Large leather goods
Large leather goods remain the backbone of the
Burberry non-apparel business, representing about
50% of revenues in this category.
• Men’s accessories
Men’s accessories was amongst the strongest
performing categories within non-apparel, albeit from
a small base. Strong growth across wholesale and
retail channels was driven by a significantly expanded
assortment servicing increased demand. Consistent
global growth in this category was complemented by
a particularly strong performance in certain markets
such as China, where the predominantly male
luxury consumer responded very positively to the
accessories offer.
• Shoes
Women’s shoes represent an important growth
opportunity for Burberry, reaching 7% of mainline
sales in 2010/11. Boots, a natural complement
to the Burberry outerwear offer, performed
particularly strongly.
measuring our progress
Growth in non-apparel revenue (Year to March) – measures the
success of Burberry’s initiatives to expand in this category, which
includes handbags, small leather goods, scarves, shoes, belts
and jewellery.
£563m in 2010/11 +32%
11
10
10*
09
08
07
563
417
420
366
290
211
+32%
+10%
+12%
+39%
+15%
Revenue is retail/wholesale only. Growth rate is year-on-year underlying change
i.e. at constant exchange rates.
2007-2009 and 2010* include the result of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
In 2010/11, non-apparel revenue increased by 32% underlying
compared to 24% for Burberry as a whole. Non-apparel accounted
for 40% of retail/wholesale revenue, compared to 38% last year.
Handbags are core to non-apparel, representing about half of revenue.
34
STRATEGY coNTINUED
Accelerating RETAIL-LED GRowTh
Shift company culture and processes from a static wholesale model to a dynamic retail model.
Retail-led growth refers not only to the operation of Burberry’s own stores, but also to a fundamental
shift in the Group’s operating structure.
2010/11 saw strong progress in building the brand’s retail
presence globally.
• Retail expansion and optimisation
A record number of new Burberry stores opened
around the world in 2010/11. A net 26 mainline stores
were opened during the year, including a new flagship
in Beijing, while a net 34 concessions were added. In
line with the Group’s flagship cluster strategy, half of the
new stores were opened in existing high profile markets,
while store renovations included major upgrades in
Boston and Las Vegas.
• Digital integration
2010/11 saw investment in in-store Retail Theatre
technology to connect and leverage innovative content
across all platforms. This technology enabled Burberry
to synchronise completely consistent messages
to customers across all mediums for the first time,
and offered an unrivalled audiovisual experience for
customers in stores. iPads were also introduced to
selected stores globally, allowing access to increased
inventory through Burberry World.
• Productivity gains
A continued focus on driving store productivity led
to the achievement of 11% comparable store sales
growth in the year. Average unit retail prices rose in
the period, while product flow and replenishment
capability improved. The Group’s ongoing investment
in customer service standards was a key driver in
improving productivity, evolving to cover customer
interactions across all channels to deliver a consistently
high quality experience. A global Customer Service
team was established during the year to offer 24/7
tailored support to customers in 14 languages, by
telephone, email and through the new Click to Call
and Click to Chat functions on Burberry World. Client
Services, which provides a personalised luxury service
to the Group’s most important clients, expanded to 30
locations across the world, and the Burberry Experience
sales and service programme was successfully
extended from the Americas, Asia and Europe to
Emerging Markets including China.
• New concept tests
The Brit store concept was rolled out further in 2010/11,
following the opening of the first test store in New York
in late 2009. Five new stores showcasing this casual,
contemporary expression of the Burberry brand were
opened over the course of the year, including the first
outside the US in Milan.
measuring our progress
Growth in retail revenue (Year to March) – includes comparable store
sales growth (measuring growth in productivity of existing stores),
plus revenue from new space.
Number of stores (As at March) – measures the reach of Burberry
directly-operated stores around the world.
32% in 2010/11
417 as at March 2011
11
10
09
08
07
Comparable stores
New space
China
32%
15%
14%
20%
24%
11
10
10*
09
08
07
417
312
440
419
368
292
Growth rate is year-on-year underlying change i.e. at constant exchange rates.
Comparable store sales growth is defined as the annual percentage increase in sales
from stores that have been opened for more than 12 months, adjusted for closures
and refurbishments.
Total retail sales increased by 32% underlying in the year. Comparable
store revenue growth increased by 11% (H1: 9%; H2: 13%), average
selling prices increased again in mainline stores and traffic benefited
from digital marketing initiatives. The transfer of China revenue from
wholesale to retail from 1 September 2010 following the acquisition
of the franchisees’ operations contributed 12%, with the balance
from new space.
Mainline
Concessions
Outlets
2007-2009 and 2010* include the stores of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
Excluding the discontinued business in Spain, the number of
stores directly operated by Burberry increased by 105 in 2010/11.
These included a net 26 new mainline stores, a net 34 new
concessions around the world (including 20 concessions in Spain
opened in Q4 to sell the global collection) as well as the acquisition
of 50 stores in China.
36
STRATEGY coNTINUED
INvESTING IN UNDER-pENETRATED mARkETS
Focus on and invest in under-penetrated markets. For Burberry, these consist of both developed markets like the
United States and emerging markets including China, India and the Middle East. All distribution channels and a variety
of business models are used to optimise these opportunities.
with related PR and marketing activity introducing the
brand to this young, digitally-aware customer base.
In Latin America, the Group opened its first store in
the key city of São Paulo, and now has three stores
operating in Latin America. A total of 25 stores were
opened in Emerging Markets over the course of
2010/11. Through franchise partners, the first Burberry
stores were opened in Armenia, Egypt, Israel and
Mongolia during the year.
• Building wholesale
The Group continued to invest in its wholesale
presence globally, building separate London, Brit and
childrenswear corners in department stores, exiting
generic outerwear departments and adding real
estate for menswear. A focus on building in-season
replenishment capability supported growth. 2010/11
also saw a continued focus on building the Burberry
Travel Retail business.
Key highlights in 2010/11 include:
• China acquisition
The acquisition of the Burberry business in China was a
clear highlight of the year. In September 2010, for about
£65m, the Group acquired 50 stores across 30 cities,
which had previously been operated by its Hong Kong
based franchisee. This acquisition gives the Group
control of the Burberry brand in the fastest-growing
luxury market in the world. Ten new stores have already
been opened since the acquisition, including the
brand’s most digitally-advanced flagship in the world
in Beijing. Merchandising and inventory initiatives have
successfully driven productivity in existing stores, with
comparative store sales up about 30% in the second
half of the year.
• Extended presence in Latin America, India and
new markets
Following the establishment of a joint operation in India
and the establishment of regional offices in São Paulo
and Dubai in 2009/10, the Group continued to extend
the Burberry presence in these high growth markets.
A major brand event in Mumbai in December 2010
marked the opening of the brand’s fifth store in India,
measuring our progress
Number of stores in Emerging Markets (As at March) –
measures the reach of the Burberry brand in these high
potential countries.
136 as at March 2011
11
10
09
08
07
136
111
91
79
58
Emerging Markets include: China, the Middle East, Eastern Europe, Russia, Brazil,
India and other parts of South East Asia, South Africa and Latin America.
Burberry added a net 25 stores in Emerging Markets, of which a net
seven stores were in China, five in the Middle East and three each
in India and Latin America. Of the 136 stores, 80 are directly operated,
of which 57 are in China, three in Latin America, 15 in the Burberry
Middle East joint operation and five in the Burberry India joint operation.
38
STRATEGY coNTINUED
pURSUING opERATIoNAL ExcELLENcE
Burberry continues to pursue its goal to be recognised as much for operational expertise as for product
and marketing excellence.
A continued focus on, and investment in, operational
excellence has driven improvements across all business
functions, and has been a key enabler for front-end innovation.
• Enhanced capabilities
Reinforcing and refining core back-end disciplines
was a central focus again in 2010/11, specifically
in replenishment, planning, logistics and sourcing.
Replenishment practices were enhanced across
all product categories, resulting in a nearly 50%
contribution of replenishment styles to mainline
sales over the year. Enhancing planning capabilities
enabled better execution and inventory management
and 2010/11 also saw the development of a global
pricing architecture. Improvements in sourcing drove
savings during the year and quality programmes were
introduced to factories and distribution centres globally.
Logistics enhancements enabled the execution of
monthly deliveries and fulfilment of in-season reorders.
• Introduced monthly flow
In 2010/11 the Group began to execute a synchronised
monthly flow of new product and floorsets across its
physical and virtual real estate, featured in tailored
digital assets. Requiring a co-ordinated and integrated
approach across the business, from Design, to
Merchandising, to Buying and Retail, this new approach
introduces a refreshed offer each month, while providing
a strong platform from which to connect customers
more regularly with the Burberry brand.
• Continued SAP implementation
The Group took further steps towards the completion of
its implementation of SAP, with 80% of stores covered by
the end of the year and the incorporation of China and
Burberry Middle East scheduled for 2011/12. In addition,
between April and November 2010, Burberry successfully
implemented a new, single SAP HR database for the
employee records of 6,500 employees in 25 countries
across Europe, the Americas and Asia. This is allowing
the Group to align its global HR processes and structures,
and is providing global visibility for the first time.
• Prioritised organisational effectiveness
Closer collaborative relationships within the business
have been critical to the successful development and
implementation of Group initiatives. Further senior level
governance structures have been established during the
year to leverage operating best practice globally and to
co ordinate all capital investments. For example, IT has
become an integral partner to key marketing and retail
initiatives including Burberry World and Retail Theatre,
while supply chain innovation has been a key enabler
in allowing customers to purchase directly from the
runway. The foundation was also set during the year for
the establishment of a global shared services team to
drive efficiencies and enhance financial control across
the business, while global strategy teams have been
established to build detailed medium to long-term views
for all regions. Externally, partnership working continues
to bring benefits in key areas such as corporate
responsibility. Burberry joined the Ethical Trading Initiative
during the year, making it the first luxury brand to do so.
measuring our progress
Retail/wholesale gross margin (Year to March) – measures, among
other things, how efficiently Burberry sources its products.
Adjusted retail/wholesale operating profit margin (Year to March) –
measures how Burberry’s initiatives and its investment to improve its
business processes, including sourcing, IT and logistics are impacting its
profit margin.
64.9% in 2010/11
15.6% in 2010/11
11
10
10*
09
08
07
64.9%
61.0%
59.7%
52.1%
58.5%
56.9%
11
10
10*
09
08
07
15.6%
12.7%
11.6%
9.8%
14.9%
14.6%
2007-2009 and 2010* include the result of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
Gross margin in retail/wholesale increased by 390 basis points
to 64.9% in 2010/11 compared to the 61.0% margin the prior year
(excluding the discontinued Spanish operations) due to the shift
from wholesale to retail and increased replenishment.
Adjusted operating profit margin is stated before exceptional items.
2007-2009 and 2010* include the result of the discontinued Spanish operations.
2010 has been represented to exclude the discontinued Spanish operations.
Burberry’s adjusted retail/wholesale operating profit margin increased
from 12.7% in 2009/10 (excluding the discontinued Spanish
operations) to 15.6%. Regional cost leverage was achieved despite
the shift from wholesale to retail and investment in new ventures.
40
BUSINESS AND FINANCIAL REVIEW
GROUP FINANCIAL HIGHLIGHTS
+27%
Revenue of £1,501m,
up 27%
(2010: £1,185m)
27.9%
Tax rate on adjusted profit before
tax of 27.9%
(2010: 27.4%)
15.6%
Adjusted retail/wholesale operating
margin at record level of 15.6%
(2010: 12.7%)
+39%
Adjusted diluted earnings per share
up 39% to 48.9p
(2010: 35.1p)
+39%
Adjusted profit before tax of
£297.9m up 39%
(2010: £214.8m)
+43%
Full year dividend per share
up 43% to 20.0p
(2010: 14.0p)
£ million
Continuing operations
Revenue
Cost of sales
Gross margin
Operating expenses#
Adjusted operating profit
Net finance charge#
Adjusted profit before taxation
Exceptional items
Profit before taxation
Taxation
Discontinued operations
Non-controlling interest
Attributable profit
Adjusted EPS (pence)~
EPS (pence)~
Weighted average number of ordinary shares (millions)
Year to 31 March*
% change
2011
2010
reported FX
underlying
27
(16)
33
(31)
37
37
39
24
34
36
1,501.3
(491.6)
1,009.7
(708.6)
301.1
(3.2)
297.9
(2.2)
295.7
(83.2)
(6.2)
2.1
208.4
48.9
46.9
444.0
1,185.1
(423.9)
761.2
(541.3)
219.9
(5.1)
214.8
(3.4)
211.4
(58.8)
(70.4)
(0.8)
81.4
35.1
18.4
441.9
* FY 2010 has been re-presented to show the results of the discontinued Spanish operations separately. Discontinued operations in 2011
include an operating loss of £2.1m (2010: nil), restructuring costs of £4.1m (2010: £45.4m) and a nil tax charge (2010: £25.0m).
Adjusted measures exclude restructuring costs and the Chinese put option liability finance charge.
# Operating expenses in the table above exclude restructuring costs – a £1.0m credit in 2011 (2010: £3.4m charge) included in the reported expenses
of £707.6m (2010: £544.7m). The net finance charge in the table above excludes a £3.2m Chinese put option liability finance charge (2010: nil)
included in the reported finance charge of £6.4m (2010: £5.1m).
~ EPS is calculated on a diluted basis.
44
Revenue by channel
£ million
Retail*#
Wholesale*#
Licensing
Revenue – continuing operations
Discontinued Spanish operations
Year to 31 March
% change
2011
962.3
440.6
98.4
1,501.3
49.3
1,550.6
2010
710.1
377.5
97.5
1,185.1
94.8
1,279.9
reported FX
36
17
1
27
(48)
21
underlying
32
16
(4)
24
(46)
19
* FY 2010 re-presented to exclude discontinued Spanish operations (retail £39m; wholesale £56m). FY 2011 Spain discontinued sales are
£26m retail; £23m wholesale.
# Burberry acquired its Chinese operations with effect from 1 September 2010. Excluding China in both FY 2010 and FY 2011 gives underlying
growth of 20% in retail and 25% in wholesale.
Retail
64% of revenue (2010: 60%); generated from 174
mainline stores, 199 concessions within department stores,
44 outlets and digital commerce
Retail sales increased by 32% on an underlying basis (36%
at reported FX). China, which transferred from wholesale
to retail on 1 September 2010 following the acquisition of
the former franchisees’ operations, contributed 12% of this
underlying growth. New space in other regions generated
a further 9% of the underlying growth.
Comparable store sales in the year increased by 11%
(H1: 9%; H2: 13%), with mainline stores significantly
outperforming in line with the strategy. In mainline stores,
average selling prices increased again, largely reflecting
mix (greater penetration of Burberry Prorsum and London
with continued outperformance from outerwear) and
improved full price sell-through. Traffic benefited from
digital marketing initiatives and the introduction in the
second half of the year of monthly flow of products,
offering newness for consumers. Replenishment styles
accounted for nearly half of mainline revenue – up by
nearly 10 percentage points in the last year.
Asia Pacific, where retail accounted for about 80% of
revenue in the year, performed strongly, with double-digit
comparable store sales growth throughout the period,
led by Hong Kong and Taiwan. Excluding China, a net
seven stores were opened in the region, of which five were
clustered in Hong Kong. Comparable store sales growth
of the acquired business in China was about 30% in the
second half. These sales were not included in Burberry’s
11% comparable growth in the year.
Europe delivered double-digit comparable growth in
the year, with the focus of investment on both mainline
stores, including London Heathrow Terminal 5 and the
first Burberry Brit trial outside the United States, in Milan,
as well as new concessions for non-apparel and Brit in
prestige department stores.
Americas’ performance improved in the second half of
the year. In the United States, Burberry opened a further
four Brit trial stores. Outside the United States, Burberry
opened its fourth store in Canada, as well as its first two
stores in Brazil and its first in Mexico.
The Burberry Middle East joint operation, with 15 stores
in the region, delivered a strong fourth quarter due to
increased tourist activity. Further investment was made
in the Dubai regional office and in retail expertise.
Average retail selling space increased by 18% in the year
(H1: 11%; H2: 26%), of which China (both acquired and
new stores) contributed 9% in the year (H1: 3%; H2: 16%).
45
BUSINESS AND FINANCIAL REVIEW CONTINUED
Wholesale
29% of revenue (2010: 32%); generated from sales to
department stores, multi-brand specialty accounts,
Emerging Market franchisees and Travel Retail
Excluding China, underlying wholesale revenue increased
by 25% in the year. This reflects restocking by wholesale
customers as well as robust consumer demand for the
Burberry brand. Improved planning, supply chain and
logistics capabilities enabled Burberry to satisfy higher
in-season orders and to achieve better order fulfilment
rates. Menswear performed very strongly, especially
in the second half, as Spring/Summer 2011 was the
first collection designed entirely in-house, following the
termination of the final regional menswear licences.
By region, Asia Pacific, the Americas and Emerging
Markets all performed strongly. A net nine stores were
opened by franchisees during the year. Europe, which
accounts for about 40% of Group wholesale revenue,
showed more moderate growth as the business continued
to focus on key department store customers and
rationalise small, non brand-enhancing specialty accounts.
Initial sales of the Spring/Summer 2011 global collection
in Spain contributed 2% to the 25% underlying growth
in the full year (H1: nil; H2: 4% contribution to growth).
Licensing
7% of revenue (2010: 8%); of which approximately
two-thirds from Japan (split roughly two-thirds apparel
and one-third from various short-term non-apparel
licences) and the balance from global product licences
(fragrance, eyewear and timepieces) and European
wholesale childrenswear
Total licensing revenue in the year declined by 4% on
an underlying basis, in line with guidance. Revenue was
up 1% at reported FX, reflecting the strength of the yen,
which is largely hedged 12 months forward.
The planned termination of the final regional menswear
licences and the Japanese leather goods licence reduced
revenue by £6m, as expected. Other Japanese royalty
income was broadly flat year-on-year, while the global
product licences delivered double-digit growth.
During the year, Burberry strengthened its organisation
to manage relationships with global product licensees
more intensively, more closely aligning strategies to
realise the potential of licensed products in line with
owned categories. In December 2010, Burberry and
Interparfums extended certain terms of their fragrance
licence by one year.
Including China, wholesale revenue increased by 16%
on an underlying basis (up 17% at reported FX).
Burberry continues to evaluate integration opportunities
in licensing.
46
Adjusted operating profit
£ million
Retail/wholesale
Licensing
Adjusted operating profit
Year to 31 March
% change
2011
219.5
81.6
301.1
2010
137.7
82.2
219.9
reported FX
59
(1)
37
underlying
58
(6)
34
Adjusted operating margin
20.1%
18.6%
Adjusted operating profit in the year increased
by 37% to £301.1m, including a £6.3m benefit
from exchange rates.
Retail/wholesale adjusted operating profit
£ million
Revenue
Cost of sales
Gross margin
Gross margin
Operating expenses
Adjusted operating profit
Operating expenses as % of sales
Adjusted operating margin
Retail/wholesale adjusted operating profit grew by 59% to
£219.5m, up £82m year-on-year. A gross margin increase
of 390 basis points was partly offset by higher operating
expenses as guided.
Gross margin
Gross margin for the year increased by 390 basis points
to 64.9%. In the first half, gross margin improved by 670
basis points, driven by increased full price sell-through
resulting from strategies implemented in the second half
of the previous year. Following the 1,400 basis point
improvement in the second half of FY 2009/10, the
second half increase in FY 2010/11 was, as expected,
more modest (up 170 basis points). This reflected the
shift to retail from wholesale, a further but more moderate
improvement in mainline sell-through and higher sales
of replenishment styles, offset in part by a mix shift to
Burberry Prorsum and London.
Year to 31 March
2011
1,402.9
(491.6)
911.3
64.9%
(691.8)
219.5
2010
1,087.6
(423.9)
663.7
61.0%
(526.0)
137.7
49.3%
15.6%
48.3%
12.7%
% change
reported FX
29
(16)
37
(32)
59
Operating expenses
Operating expenses as a percentage of revenue were
49.3% in the full year (H1: 49.5%; H2: 49.1%).
Regional expenses, which are about two-thirds of total
costs, grew by less than the rate of sales growth, despite
the shift to retail and an increased investment of about
£40m in new ventures such as China, Latin America,
India and the Japanese non-apparel joint operation.
This operating leverage was then re-invested in corporate
initiatives to drive future growth, in areas such as design,
customer service, IT and marketing. The cost of share
schemes increased by about £15m year-on-year, with
a similar increase currently expected in FY 2011/12.
47
BUSINESS AND FINANCIAL REVIEW CONTINUED
Licensing operating profit
£ million
Revenue
Cost of sales
Gross margin
Gross margin
Operating expenses
Operating profit
Operating margin
Licensing revenue declined by 4% on an underlying basis,
up 1% at reported FX. With slightly higher operating
expenses as Burberry strengthened its in-house team,
operating profit was £81.6m, a margin of 82.9%.
Exceptional items
£ million
Restructuring credit/(costs)
Chinese put option liability
finance charge
Year to 31 March
2011
1.0
(3.2)
(2.2)
2010
(3.4)
–
(3.4)
Restructuring
The restructuring credit of £1.0m relates to the release of a
provision held in respect of the cost efficiency programme
announced in January 2009 (2010: £3.4m charge).
15% economic interest in the Chinese business
As disclosed at the time of the transaction, there is
a 15% economic interest held by a third party in the
acquired China business. As there is a put option which
is exercisable from 2020, accounting rules state that
the discounted value of the estimated ultimate liability
must be recognised on the balance sheet (£47.3m at
31 March 2011). In subsequent periods, there may be two
adjustments taken through the income statement. Firstly,
any change to the estimate of the ultimate liability will be
taken through operating profit. Secondly, the unwind of
the discount (together with the impact of any change in
discount rate) will be taken through interest. Both of these
will be treated as exceptional items and excluded from
adjusted profit before tax. The £3.2m non-cash charge
taken in the year represents the unwind of the discount
in the seven months since acquisition.
48
Year to 31 March
Year to
31 March 2011
2011
98.4
–
98.4
100%
(16.8)
81.6
2010
97.5
–
97.5
100%
(15.3)
82.2
82.9%
84.3%
underlying
94.0
–
94.0
(17.0)
77.0
Taxation
In FY 2010/11, Burberry had a tax charge of £83m,
giving a tax rate, as guided, of 27.9% (2010: 27.4%).
The tax rate on adjusted profit for FY 2011/12 is currently
expected to be about 27%.
Discontinued operations
Burberry has now largely completed the restructuring
of its Spanish operations announced in February 2010.
The results have been included in discontinued operations
as below.
£ million
Adjusted operating result
Restructuring costs
Taxation
Loss for discontinued
Spanish operations
Year to 31 March
2011
(2.1)
(4.1)
–
(6.2)
2010
–
(45.4)
(25.0)
(70.4)
In FY 2010/11, the discontinued operations generated
sales of £49.3m (2010: £94.8m) and an adjusted operating
loss of £2.1m (2010: nil). This is better than guided due
to more effective clearance of residual inventory and tight
cost control during the exit period. In FY 2011/12, sales
of the global collection in Spain through all channels will
be reported within Europe.
Following a small credit in the second half, the charge
associated with restructuring Spain was £4.1m in the year.
Cash spend was £20m.
Net cash and balance sheet
Net cash at 31 March 2011 was £298m, up from £262m
at 31 March 2010, nothwithstanding the £52m investment
to date in acquiring the China business and £108m of
capital expenditure. Working capital was broadly neutral
in the year. Other major outflows were restructuring spend
(£20m), tax paid (£98m) and dividends (£69m).
On this basis, underlying licensing revenue from Japan
is expected to be broadly flat year-on-year. A step-up
in royalty income from the apparel licence, which was
negotiated in October 2009, will be offset by the planned
termination of additional non-apparel licences in Japan.
The global fragrance, eyewear and timepieces product
licences are expected to deliver double-digit growth.
Inventory at 31 March 2011 was £248m, an increase
of 49% year-on-year, reflecting growth in the business.
Of the £81m increase, roughly one-third is in China and
two-thirds is the investment to support monthly flow of
new products and increased replenishment.
In March 2011, Burberry renegotiated its revolving credit
facility, now totalling £300m and maturing in June 2016.
The pricing and terms of this new facility are significantly
improved compared to the previous £260m facilities which
have been cancelled.
Outlook
While mindful of the global macro challenges in 2011/12,
Burberry remains confident in its strategies. With a strong
financial position, Burberry will continue to invest for
growth in the current year.
Revenue
The following guidance for retail, wholesale and licensing
is consistent with that given in April 2011.
• Retail
In the year to 31 March 2012, Burberry plans an increase
of 12-13% in average retail selling space. This includes a
net 20-25 additional mainline stores with a bias towards
China, Latin America and the Middle East. In addition,
the 50 stores acquired in China will add about 12% to
average selling space in the first half of the year.
• Wholesale
In the six months to 30 September 2011, Burberry
projects wholesale revenue excluding China to increase
by a mid teens percentage at constant exchange
rates. Good progress is expected from the Americas,
Travel Retail and Emerging Markets and sales of the
global collection in Spain are expected to continue to
contribute a low single-digit percentage to this growth.
Including China, wholesale revenue in the first half is
projected to increase by a mid single-digit percentage
at constant exchange rates (2010: £226m).
• Licensing
In the year to 31 March 2012, Burberry expects
licensing revenue at constant exchange rates to
increase by a mid single-digit percentage. This assumes
all Japanese apparel and non-apparel royalty
income is received at contractual minimum levels
as originally planned.
In the year to 31 March 2012, licensing revenue at
reported FX is expected to increase by a high single-digit
percentage, reflecting a more favourable yen hedge rate
year-on-year.
Operating margin
In FY 2010/11, Burberry delivered a record adjusted
retail/wholesale operating margin of 15.6%. Gross margin
and operating expenses will continue to be dynamically
managed to enable further investment in the business:
• to evolve its business model, organisation and
infrastructure (in areas including customer service,
planning and supply chain);
• to drive long term growth (including flagship transitional
costs and digital initiatives across all channels).
For FY2011/12, Burberry expects to deliver a modest
improvement in operating margin. However, with
investment weighted to the first half, operating margin
in the six months to September 2011 is currently
expected to be lower than in the same period last year.
Capital expenditure
Capital expenditure in FY 2010/11 was £108m, below
guidance of around £130m, reflecting delayed cash
outflow on certain projects.
In FY 2011/12, capital expenditure is planned at
£180-£200m, partly reflecting this delayed spend from
2010/11. Given the brand momentum and increased
store productivity, the year-on-year uplift is mainly in
retail, balanced between new stores and refurbishments.
New space growth is planned to accelerate to 12-13%
(excluding acquired China stores), while the number of
major renovations is planned to increase significantly
to between 15 and 20.
Retail investment will be clustered in flagship markets,
including London, Paris and Milan; Chicago; and Hong
Kong, Shanghai and São Paulo.
Investment in IT business projects will continue at around
£30m, with the emphasis on increasing connectivity
between Burberry and its suppliers, employees,
customers and partners.
49
BUSINESS AND FINANCIAL REVIEW CONTINUED
Store portfolio
At 31 March 2010*
Additions#
Closures
Transfers~
At 31 March 2011
Directly-operated stores
Mainline stores
131
28
(2)
17
174
Concessions
134
45
(11)
31
199
Outlets
47
2
(7)
2
44
Total Franchise stores
97
312
13
75
(4)
(20)
(50)
50
56
417
* Excluding concessions in Spain.
# Including 20 concessions in Spain opened in Q4 to sell global collection.
~ Transfers are the 50 acquired Chinese stores.
Store portfolio by region
At 31 March 2011
Europe*
Asia Pacific
Americas#
Rest of World
Total
Directly-operated stores
Mainline stores
Concessions
Outlets
Total Franchise stores
37
48
72
17
174
50
147
–
2
199
17
8
18
1
44
104
203
90
20
417
20
15
3
18
56
* Including 20 concessions in Spain opened in Q4 to sell global collection.
# Three franchise stores in the Americas are in Mexico.
Sales to franchise stores reported in wholesale revenue.
50
RISK
PRINCIPAL RISKS
Effective management of risks is essential to the delivery of the Group’s objectives, the achievement of sustainable
shareholder value, the protection of its reputation and meeting corporate governance requirements.
The risks set out below represent the principal risks
and uncertainties which may adversely impact the
management of the Group and the execution of its growth
strategies. The steps the Group takes to address these
risks, where they are matters within its control, are also
described. Such steps will mitigate but not eliminate risks.
Some of the risks relate to external factors which are
beyond the Group’s control. The order of the risks is in no
way an indication of their relative importance, and each of
the risks should be considered independently. If more than
one of the events contemplated by the risks set out below
occur, it is possible that the combined overall effect of
such events may be compounded.
The Board has overall responsibility for ensuring that
risks are effectively managed by the Group. The Board
has delegated to the Audit Committee responsibility
for reviewing the effectiveness of the Group’s system
of internal control and risk management methodology.
Risks are formally reviewed by the Group Risk Committee
which meets at least three times a year. Key business
risks are also considered as part of the Group’s strategy
development and ongoing business review processes.
The risk assessment process has been enhanced during
the financial year incorporating best practice identified
during a benchmarking review. Please refer to the
Corporate Governance section for further details of the
Group’s risk management processes and internal controls.
Risk
Impact
Mitigation
Loss of key management or the
inability to attract and retain
key employees.
The Group’s operations depend
on IT systems and operational
infrastructure in order to trade
efficiently. Increasingly technology
is also being used to stream major
events and to communicate through
social media.
Major incidents such as natural
catastrophes, global pandemics
or terrorist attacks affecting one
or more of the Group’s key locations
could significantly impact
its operations.
The loss of key individuals or the inability
to recruit and retain individuals with the
relevant talent and experience would
adversely impact the Group’s ability to
deliver its strategies.
A failure in these systems or a denial
of service could have a significant
impact on the Group’s operations and
reputation, and potentially result in the
loss of sensitive information. Negative
social media campaigns could impact
on the Group’s reputation.
A major incident at a key location would
significantly impact business operations,
the impact clearly varying depending on
the location and its nature. The impact
of the loss of a distribution hub would
clearly differ from a global pandemic,
but both would impact revenue
and profits.
Competitive incentive arrangements
exist, with specific initiatives in place
designed to retain key individuals.
Recruitment is ongoing and talent
review and succession planning
programmes are in place.
A number of controls to maintain the
integrity and efficiency of the Group’s IT
systems are in place, including recovery
plans which would be implemented in
the event of a major failure. IT security is
continually reviewed and updated.
Business continuity plans are in place
to mitigate operational risks, but cannot
ensure the uninterrupted operation
of the business, particularly in the
short term. The regional spread of the
Group’s three key distribution hubs also
helps to mitigate risk. There is a Group
incident management framework in
place that addresses the reporting and
management of major incidents.
54
Risk
Impact
Mitigation
The Group operates in a number
of emerging markets which
are typically more volatile than
developed markets, and are subject
to changing economic, regulatory,
social and political developments
that are beyond the Group’s control.
Infrastructure and services also tend
to be less developed.
Seizure of assets or staff. Related party
business practice that is inconsistent
with the Group’s ethical standards
and the UK regulatory environment.
Increased operational costs due to
country specific processes driven by
the regulatory environment.
Failure by the Group or associated
third parties to act in accordance
with ethical standards.
A failure to act appropriately could result
in penalties, adverse press coverage
and reputational damage with a
resulting drop in sales and profit.
The Group’s operations are subject
to a broad spectrum of regulatory
environments with which it needs
to comply. The pace of change
and the consistency of application
of legislation vary significantly
in the countries in which the
Group operates, particularly in an
environment where public sector
debt is often high and tax revenues
are falling.
Over-reliance on key supply
chain vendors.
Failure to comply could leave the
Group open to civil and/or criminal legal
challenge, significant penalties and
reputational damage.
The Group relies on a small number
of vendors in key product categories,
and for specialist digital and IT services.
Failure of one of these businesses to
deliver products or services would have a
significant impact on business operations.
The significant growth within the
business puts pressure on resources
and the supply chain.
Failure to effectively manage the pace
of change will inevitably adversely
impact the Group’s operations and
return on investment.
The Group uses the services of
professional consultants to advise
on legal and regulatory issues when
entering new markets, to undertake
due diligence and to monitor ongoing
developments. The Group has
strengthened the teams responsible for
its emerging markets operations and
works with franchisees or joint operation
partners who compensate for its relative
lack of experience in a number of
these markets.
A number of initiatives are in place,
led by the Corporate Responsibility
Committee which reports in to the
Group Risk Committee. These include
undertaking ethical visits and joining the
Ethical Trading Initiative, further details
of which are set out in the Corporate
Responsibility report.
The Group continually monitors and
improves processes to gain assurance
that its licensees, suppliers, franchisees,
distributors and agents comply with its
terms and conditions and relevant local
legislation and good practice.
Specialist teams at Group and regional
level, supported by third-party specialists
where required are responsible for ensuring
employees are aware of regulations
relevant to their roles. A number of
assurance processes are in place to
monitor compliance.
The Group continues to strengthen
its supply chain management team
to enable it to evolve and develop its
manufacturing base to reduce the
dependency on key vendors. The
Group has strengthened its internal
digital and IT teams during the year
and continues to facilitate knowledge
transfer to internal resources. Annual
financial checks are carried out on all
key vendors.
Governance processes are in place
for each major strategic initiative and
these are supplemented by monthly
meetings with senior management
to review operational performance.
Management and operational structures
are continually reviewed to ensure that
these support the Group’s growth.
The Group closely manages key
supplier relationships, which includes
the monitoring of financial and
non-financial performance.
55
RISK CONTINUED
Risk
Impact
Mitigation
A substantial proportion of Group
profits is reliant upon its licensed
business in Japan and other key
licensed product categories.
The Group expects licensees to
maintain operational and financial
control over their businesses. Should
licensees fail to manage their operations
effectively or be affected by a major
incident, the royalty income may
decline directly impacting the profits
of the Group.
Economic downturn.
Unauthorised use of the
Group’s trademarks and other
proprietary rights.
Inability to absorb commodity
price increases.
Anticipated benefits of acquisitions
and joint operations may not
be realised.
The Group’s performance remains
strong; however, reduced consumer
wealth driven by adverse economic
conditions could lead to a reduction in
demand, disrupt its supply chain or lead
to an increase in bad debts, all of which
would impact sales and profitability.
Trademarks and other intellectual
property (IP) rights are fundamentally
important to the Group’s reputation,
success and competitive position.
Unauthorised use of these, as well as
the distribution of counterfeit products,
damages the Burberry brand image
and profits.
The Group’s ability to produce
products and deliver them on time
depends on the availability and price of
commodities, which fluctuate according
to global economic conditions, weather
patterns, civil unrest and natural
disasters. Failure to obtain adequate
supplies, or supplies at the right time,
will impact gross margin and profit.
The Group’s acquisitions, strategic
alliances and joint operations may not
yield the financial outcomes expected,
and can therefore impact sales,
profitability and the return on investment.
To minimise risks in Japan the Group
has established its own operations
in Tokyo, and there are minimum
royalty payments specified in its
licence agreements, including the
apparel licence with Sanyo Shokai and
Mitsui & Company. Under its licence
agreements, the Group can control
product development, marketing
and distribution. Regular licensee
royalty reviews take place to monitor
compliance with licence terms,
which can manage but not eliminate
non-compliance.
The global reach of Burberry helps
mitigate local economic risks.
In addition, the Group’s financial
reporting and review processes would
highlight any ongoing drop in demand.
Counterparty credit checks are in place
for all key customers and suppliers,
and flexible payment terms are used to
assist suppliers as required.
The Group’s global IP team has been
expanded during the year to increase
cover in emerging markets. Where
infringements are identified (often in
partnerships with other luxury brands
and retailers) these are addressed
through a mixture of criminal and civil
legal action and negotiated settlement.
IP rights are largely driven by national
law and the Group cannot necessarily
be as effective in all jurisdictions in
addressing IP issues.
The Group’s agreements with suppliers
are negotiated by its global sourcing
teams in advance.
In addition to rigorous due diligence
processes for acquisitions, using both
in-house experts and professional
advisers, post acquisition reviews are
also undertaken to ensure the business
is performing in line with acquisition
business plans.
56
CORPORATE RESPONSIBILITY
EXCELLENCE IN PEOPLE
Seizing the energy of our brand and the passion of our people, we lead the evolution of an agile, connected Burberry,
creating the talent of today and tomorrow.
Burberry is part of an extended community made up of
both employees and external partners, with the twin aims
of being a great brand, as well as a great company to work
for and do business with.
Evolving the organisation, across regions and functions,
is a natural part of the business and has become second
nature. This year we have established a number of
cross-functional strategic decision councils that enable
us to stay closely connected and make timely decisions
about business priorities that support our five key business
strategies. Each strategic council is chaired and co-chaired
by a member of the Executive Strategic Council and
individuals from cross-sections of the business are invited
to connect and collaborate based on their expertise.
Examples of these councils include a Strategic Customer
Council, Strategic Innovation Council and Strategic
Responsibility Council.
A more robust process to identify talent and potential
was also implemented during the year, to feed effective
succession and workforce planning, and elevate our existing
Leadership Development programme and bi-annual Talent
Reviews. Every employee in the company is now eligible
to participate in the Group’s freeshare plans and is in a
performance based incentive scheme.
Diversity
A commitment to diversity remains one of our principal
values. Our diverse employee population continues to
enrich and strengthen our company culture, driving our
success as a luxury brand.
After continued expansion into emerging markets and the
opening of new regional head office locations in Asia and the
Middle East, our global workforce continues to diversify and
grow. Burberry now employs nationals of 95 countries across
all continents.
We continuously open our doors to new and developing talent
and we are focused in providing opportunities for employees
across the organisation to realise their full potential.
We are committed to promoting gender equality and equal
opportunities at every level of the organisation. Our global
management team is evenly split by gender. In the 2010
Opportunity Now Awards, Burberry was awarded the
‘Female FTSE 100 Award’ which is presented to the UK
business with the most women on its board. This was in
addition to receiving the ‘FTSE Executive Women Award’
which is given to the UK business that employs the most
female executives as listed in the FTSE 100 index.
Health, safety and wellbeing
Burberry is committed to providing a safe and healthy
working environment for its employees, customers and
third party contractors. Burberry uses a third party to
undertake audits at its locations throughout the world.
The audit framework requires stores and offices to be
audited at least once every three years, and distribution
centres or manufacturing sites annually. A governance
framework is in place to ensure audit recommendations
are addressed in appropriate timeframes, and ultimate
ownership sits with the Global Health & Safety Committee,
which is chaired by a Board member.
Burberry launched a wellbeing programme in 2010/2011,
which was designed to encourage staff to lead healthier
lifestyles. Research identified that staff had found that the
programme had increased their awareness of how to live a
healthier lifestyle, and reduced the amount of sick leave. In
the UK this reduced dramatically to 0.8% days per employee
compared to the 2010 Chartered Institute of Personnel and
Development retail and wholesale rate of 2.6%.
58
The multi-channel customer experience
In response to an increasingly multi-channel customer,
the Burberry Experience sales and service programme
has evolved to cover all customer interactions across
all channels – in-store, online, and by phone-to-deliver
an exceptional, consistent and differentiated service.
In store, the roll out of the Burberry Experience began in
Emerging Markets and China, after previous successful
implementation in the Americas, Asia and Europe.
Consistent sales and service training is now provided
across all stores globally. The programme continues
to evolve in order to enhance further the customer
experience, and the first in-store pilots of multi-channel
digital initiatives have been completed.
Service standards have been developed and evolved
through guidelines and policies that ensure all
customer-facing channels offer an elevated and globally
consistent service. The implementation of global repair
centres and an International Return Policy have enhanced
the after sale service, ensuring a personalised experience
at every interaction with the brand.
There has been investment in improving customer service
contact and this year a global in-house Customer Service
team has been established. This team provides 24/7
support to customers in 14 languages. They engage with
customers by phone, email and through ‘Click to Chat’
and ‘Click to Call’ on burberry.com.
Client Services, which provides a personalised luxury
service to Burberry VICs (Very Important Clients)
worldwide, continues to expand across all regions and
to reinforce customer loyalty globally. Specialist Client
Services Consultants are now available in 30 flagship
locations across the world, speaking 20 languages.
VICs also have access to Client Service Consultants
online and by phone to enhance the luxury experience.
Underpinning these activities has been an initial focus on
the analysis of cross-channel business activity, generating
customer insight to increase retail productivity.
59
CORPORATE RESPONSIBILITY CONTINUED
OPERATING RESPONSIBLY
Since its foundation in 1856, Burberry has sought to achieve the very highest quality standards.
Corporate Responsibility is at the heart of Burberry business practices, reinforcing the heritage
and authenticity of the brand.
Burberry believes that to be a great brand you also
need to be a great company. This belief is reflected in its
continued pursuit of improved Corporate Responsibility
(CR) performance; its tackling of issues related to climate
change; and efforts to inspire employees on issues
of ethical trade, environmental sustainability and
community investment.
Burberry is a member of the UN Global Compact and uses
the Compact’s Ten Principles to guide its CR activities. The
company is also listed on the FTSE4Good Index, achieved
the Carbon Trust Standard and is an active member
of both the Ethical Trading Initiative and Business for
Social Responsibility.
The following sections outline Burberry’s approach to
tackling important social and environmental challenges,
including some key achievements in 2010/11.
Overall highlights of the year
• Increased the number of factories with worker hotlines
by 54% to a total of 33
• Joined the Ethical Trading Initiative – the first luxury
brand to do so
• Launched a Sustainability Digital Film to employees
globally to raise awareness of corporate sustainability
initiatives
• Committed to increase the proportion of the Group’s
UK electricity purchased from combined heat and
power sources from 29% to 100% to drive demand
for renewables in the UK
• The Burberry Foundation distributed over 2,500 iconic
trench coats to partner charities in London, New
York City, Hong Kong and Seoul, all working with
disadvantaged youth
CR governance
Michael Mahony, Senior Vice President Commercial
Affairs & General Counsel, is accountable for CR matters
on behalf of Burberry and the Board. He chairs the CR
Committee, which formally reports to the Group Risk
Committee. The CR Committee held three meetings
during the year.
Two supplementary committees, the Global Sustainability
Committee and Supply Chain Risk Committee met three
times respectively.
In 2010/11 the Group strengthened its CR team
to a total of 16 members globally.
Ethical supply chain
Burberry believes that its products should be made
only in factories that comply with local labour and
environmental laws and by workers who work fair but not
excessive hours, are provided with a safe, hygienic work
environment, and who can exercise their right to freedom
of association as well as collective bargaining. The majority
of Burberry products are manufactured in Europe through
third party suppliers.
All Burberry suppliers are governed by the Group’s Ethical
Trading Policy, which sets clear expectations regarding
the management of labour standards. Four new policies
were added to this during the year, covering Bribery
and Corruption, Foreign Contract Labour, Unauthorised
Sub-Contracting and Animal Welfare.
Ten Burberry team members are charged with ensuring the
implementation of the policy throughout the supply chain
as their sole responsibility, working in partnership with
third-party auditors and NGOs as appropriate to approve
and assess the activities of suppliers. The team conducted
over 700 audits, capacity building and hotline interventions
in 2010/11. To complement its auditing programme,
Burberry has trained workers in confidential worker
hotline services in select factories to provide an effective
whistle-blowing mechanism and counselling service.
To achieve long-term improvements in labour conditions,
Burberry provides support and resources to suppliers to
empower them to take responsibility for their factory and
subcontractor conditions. The CR team delivers supplier
training covering the Group’s ethical trading expectations,
management systems and counsel on transparency and
standards for subcontractors.
Stakeholder engagement
Burberry understands that it cannot solve supply chain
labour issues alone and maintains an open dialogue with
suppliers, other brands, NGOs and trade unions to bring
collective action to bear across the supply chain.
60
To increase engagement with ethical trade stakeholders,
Burberry joined the Ethical Trading Initiative (ETI) in
June 2010. The ETI is a tripartite alliance of companies,
trade unions and voluntary organisations that work
collaboratively to improve the lives of workers worldwide.
Environmental sustainability
Burberry is committed to finding innovative ways to
minimise environmental impacts from the production,
distribution and sales of its products, and to reducing its
environmental footprint throughout its global operations.
The work of the Business for Social Responsibility
Sustainable Luxury Working Group, of which Burberry
was a founding member, also continued this year, focusing
on animal welfare guidelines and the exotic skins supply
chain. As a result, the release of a common Animal Welfare
Policy by the Group was communicated to Burberry
suppliers, detailing its high expectations in respect of
welfare standards.
Burberry is also a member of the Leather Working Group,
supporting its efforts to improve transparency in the
leather industry.
Fur
As a luxury brand with a strong outerwear heritage,
there will be occasions where Burberry design teams
or consumer tastes expect the use of natural hides
in Burberry collections.
Burberry will not use fur if there is any concern that it
has been produced using the unacceptable treatment of
animals. Burberry safeguards the correct ethical standards
and traceability in all fur sourcing. Specifically, it sources fur
from furriers who want to uphold high standards of ethical
treatment of animals and who share its concerns about
animal welfare. Burberry publicly supported the Truth In Fur
Labelling Act in the US in 2010.
Sandblasting
Burberry does not utilise sandblasting on any of its
products manufactured by or on behalf of the Group.
Burberry requires its suppliers to use hand brushing to
distress denim products, and use all appropriate Personal
Protective Equipment to ensure that workers’ health is
protected during the process.
Audits, training programmes, factory
management follow-up visits and
hotline programmes (Year to March)
721
11
10
09
721
634
487
In order to embed sustainability further this year Burberry
strengthened its Global Sustainability Committee to include
representatives from a wider variety of functions within
the business. The members are designated Sustainability
Leaders, responsible for embedding sustainable business
practices throughout the Group’s operations. In support
of the Sustainability Leaders’ work, Burberry engaged all
employees globally via targeted digital communications
encouraging them to continue to inspire and challenge
each other towards new ways of operating.
2010/11 environmental performance results
Carbon Trust:
• In April 2010, Burberry was awarded the Carbon Trust
Standard for its UK operations
Energy:
• Solar panels are being installed at the distribution
centre in Vineland, USA to utilise the energy produced
to power the centre
• Inductive motor optimisation panels were trialled in all
UK manufacturing sites to reduce energy consumption
Business travel:
• Due in part to executing the Group’s under-penetrated
markets strategy, air travel for UK employees increased
by 52% per £1,000 of turnover
Waste:
• There was a renewed focus on diverting waste from
landfill. In Horseferry House there was a 54% increase
in waste recycled during the year
• The closed loop textile recycling system launched in the
UK last year has been expanded to Europe. Since April
2010, Burberry’s recycling partner has converted over
130 tonnes of sample and raw material waste into car
door insulation
Logistics transport emissions:
• An unprecedented rise in sales coupled with the shift
from seasonal to monthly deliveries impacted the Group’s
ability to ship goods by sea. To address this, a number of
key initiatives have been introduced, including centralised
logistics decision making, shortening of critical path and
increasing strategic raw materials pre-buys in order to
accommodate sea transportation lead times.
61
CORPORATE RESPONSIBILITY CONTINUED
Performance disclosure
Burberry makes annual disclosures to the Carbon
Disclosure Project and Forest Footprint Disclosure.
Global building energy CO2 (Year to March)
(CO2 kg per £1,000 of turnover)
(Data excludes discontinued Spanish operations)
Community investment
Investing and engaging in the communities where Burberry
operates remains a key element of the Burberry CR
strategy. In 2010/11, Burberry dedicated a total of £3m,
or 1% of profits before tax, to charitable causes around
the globe, a twofold increase on 2009/10. The majority
of this giving was a donation to the Burberry Foundation.
Burberry Foundation
The establishment of the Burberry Foundation in 2008
(UK registered charity number 1123102) marked the
creation of a strategic philanthropic platform, which
enabled the Company to refine, focus and accelerate
its community engagement efforts.
20.4
19.3
21.5
The Foundation’s mission is an embodiment of company
founder Thomas Burberry’s core values: to protect,
explore and inspire. Specifically, it is dedicated to helping
disadvantaged young people to realise their dreams and
potential through the power of their creativity.
The Burberry Foundation supports innovative organisations
and programmes that leverage Burberry assets, combining
financial support with the knowledge, creativity and
dedication of Burberry employees.
The Foundation receives donations from Burberry and
other benefactors, which enable it to award strategic
grants and make targeted donations of in-kind gifts.
In 2010/11, the Foundation received £2.3m in cash and
more than £260,000 in-kind donations from Burberry.
This enabled the Foundation to support thousands of
young people in Boston, Chicago, Hong Kong, London,
Los Angeles, New York, San Francisco and Seoul, via key
partnerships with 17 charity organisations.
Employee engagement
As part of the Company’s employee engagement
programme, Burberry employees are encouraged to
dedicate up to four hours of paid leave per month in
support of the Foundation’s charity partners. Employees
provide critical one-off assistance to hundreds of young
people, as well as long-term support via one-on-one
mentoring and weekly help with school homework.
In 2010/11 over 25% of employees located in cities where
the Foundation is active offered their personal talents and
business skills to help disadvantaged young people work
towards realising their full potential. In total, over 3,700
hours or 490 working days were dedicated to volunteering.
20.4co2
11
10
09
Burberry acquired its Chinese operations with effect from 1 September 2010.
(On a like-for-like basis, excluding both the discontinued operations in Spain and
acquired business. In China in 2010/11, our CO2 emissions per £1,000 turnover
were 20.5 CO2). Restatement of 2008 and 2009 data to include sites in Asia and
Emerging Markets.
Primary transport shipped by sea (%) (Year to March)
(Based on a sea vs. air freight comparison; road data has
been excluded)
12%
11
10
09
Air travel CO2 (Year to March)
(CO2 kg per £1,000 of turnover, based on UK Employees)
3.0co2
11
10
09
12
20
17
3.0
2.0
1.5
62
A significant proportion of employee engagement
efforts are dedicated to increasing the employability of
disadvantaged young people in London, New York City
and Hong Kong. Over the past three years, 126 young
people were brought into corporate offices and retail stores
for job training and hands on work experience, ranging
from two to ten weeks. Beginning with a week of intensive
training designed and delivered by Burberry volunteers, the
entire experience provides participants with the opportunity
to explore their own creativity and talents whilst developing
the skills and confidence needed to succeed in today’s
complex business world.
Successful programme graduates receive an iconic
Burberry coat to further boost their confidence as they
look to enter the job market armed with new skills and
experiences. This year alone, more than 200 employees
dedicated over 1,500 hours to help change the lives of
65 young people through the job training programme.
In-kind donations
Burberry regularly donates products to the Burberry
Foundation for strategic distribution through partner
charities. Donations range from one-off gifts of
non-trademark fabric and materials for art and design
courses, to a large scale annual Christmas Coat
Donation programme.
In 2010/11, a record number of coats were distributed in
London, New York City, Hong Kong, and Seoul, to charities
working with disadvantaged young people to help them
access employment or re-enter education. 31 organisations
matched the coats with recipients for size and need, with
testimonials from recipients confirming that, far from being
just a gift of warmth, a Burberry coat is a gift of confidence
and inspiration that will last for years to come.
Corporate donations
An ongoing part of doing business is to selectively support
customer and supplier related events and charitable
causes. Each regional office has a discretionary charity
budget which is managed and approved locally.
Disaster relief
Burberry supported relief efforts following two catastrophic
events this past year. In support of relief efforts after
devastating flooding in Pakistan, Burberry contributed to the
Disasters Emergency Committee, an umbrella organisation
for 13 humanitarian aid agencies. In response to the
earthquake and tsunami in Japan in March, Burberry and its
employees contributed to Save the Children and British Red
Cross to assist with relief and reconstruction efforts.
d o
Community o nations (£m) (Year to March)
Direct donations are contributions made by the Company. Indirect
donations are donations from third parties that have been facilitated
by Burberry.
£3.1m
11
10
09
Indirect
Direct
3.1
1.4
1.2
63
BOARD OF DIRECTORS
Back row: Stephanie George, Philip Bowman, Ian Carter, John Smith, Stacey Cartwright
Front row: David Tyler, Angela Ahrendts, John Peace
66
John Peace (62)†‡
Chairman
John Peace has been Chairman of
the Board since June 2002 and is
also Chairman of the Nomination
Committee. He is Chairman of the
Board of Standard Chartered plc and
of Experian plc. Previously he was
Group Chief Executive of GUS plc
from 2000 until 2006.
Executive
Directors
Angela Ahrendts (50)†
Chief Executive Officer
Angela Ahrendts became Chief
Executive Officer in July 2006, having
served as an executive director
since January 2006. Angela was
previously Executive Vice President,
at Liz Claiborne Inc between 1998
and 2006 where she oversaw half
of the company’s $5bn in revenue,
comprising 22 brands. She was also
Executive Vice President of Henri
Bendel, a Limited Brands company,
from 1996 to 1998 and President
of luxury brand Donna Karan
International, from 1989 to 1996.
Stacey Cartwright (47)
Executive Vice President,
Chief Financial Officer
Stacey Cartwright joined as Chief
Financial Officer on 1 March 2004
and was appointed Executive Vice
President, Chief Financial Officer
in June 2008. She had previously
been Chief Financial Officer at
Egg plc between 1999 and 2003,
and from 1988 to 1999 she held
various finance-related positions
at Granada Group plc. Stacey was
appointed a non-executive director of
GlaxoSmithKline plc with effect from
1 April 2011.
Non-Executive
Directors
Philip Bowman (58)*†‡
Senior Independent Director
Philip Bowman was appointed as
a non-executive director in June
2002 and is the Senior Independent
Director and Chairman of the Audit
Committee. He was appointed
Chief Executive of Smiths Group
plc in December 2007 and is a
non-executive director of Berry
Bros & Rudd Limited and Better
Capital Limited. He previously held
the positions of Chief Executive at
Scottish Power plc from early 2006
until mid 2007 and Chief Executive
at Allied Domecq plc between 1999
and 2005. His earlier career included
five years as a director of Bass plc.
He was previously Chairman of
Liberty plc and Coral Eurobet plc and
a non-executive director of Scottish
& Newcastle plc and British Sky
Broadcasting Group plc.
Ian Carter (49)*†‡
Non-Executive Director
Ian Carter was appointed as a
non-executive director in April 2007.
He is currently President of Hilton
Hotels Corporation Global Operations.
He was previously CEO of Hilton
International Company and Executive
Vice President of Hilton Hotels
Corporation, and was a director of
Hilton Group plc until the acquisition
of Hilton International by Hilton
Hotels Corporation in February 2006.
He previously served as an Officer
and President of Black & Decker
Corporation between 2001 and 2004.
Stephanie George (54)*†‡
Non-Executive Director
Stephanie George was appointed
as a non-executive director in March
2006. She is currently Executive Vice
President and Chief Marketing Officer
at Time Inc., with responsibility for
the Company’s overall positioning
and promotion, and for managing
and growing Time Inc.’s Marketing
Services capabilities. Before this,
Stephanie spent 12 years at Fairchild
Publications, first as publisher of
W magazine and then as President,
Women’s Wear Daily Media
Worldwide. Stephanie also sits on
the Board of Lincoln Center.
John Smith (53)*†‡
Non-Executive Director
John Smith was appointed as
a non-executive director on
1 December 2009. He is currently
Chief Executive of BBC Worldwide.
John joined the BBC in 1989,
where he held the positions of Chief
Operating Officer, Director of Finance,
Property & Business Affairs and
Finance Director. John joined BBC
Worldwide in July 2004 and was
appointed Chief Executive in March
2005. He previously served
as a non-executive director of Severn
Trent plc between 2003 and 2008.
David Tyler (58)*†‡
Non-Executive Director
David Tyler became a non-executive
director in June 2002, having been a
director of the Company since 1997.
He was appointed Chairman of the
Remuneration Committee in March
2007. David was Group Finance
Director of GUS plc from 1997 until
its demerger in October 2006. He is
currently Chairman of J Sainsbury plc
and Logica plc and a non-executive
director of Experian plc. Earlier in
his career, David worked at Unilever
plc, County NatWest Limited and
Christie’s International plc. He has an
MA in Economics from Cambridge,
is a fellow of the Chartered Institute
of Management Accountants and
a Member of the Association of
Corporate Treasurers.
67
Key to membership of committees
* Audit Committee
† Nomination Committee
‡ Remuneration Committee
DIRECTORS’ report
The directors present their Annual Report together with the
audited financial statements for the year to 31 March 2011.
the directors’ service agreements and letters of appointment are
given in the Directors’ Remuneration Report on pages 76 to 85.
Business review
Burberry Group plc is required to set out in this report a fair review
of the business of the Group during the year to 31 March 2011
and of the position of the Group at the end of the financial year
and a description of the principal risks and uncertainties facing
the Group (known as a ‘business review’). The purpose of the
business review is to enable shareholders to assess how the
directors have performed their duty under section 172 of the
Companies Act 2006 (to promote the success of the company).
The Strategy and Group Overview sections on pages 22 to 40
and the Business and Financial Review (including Group Financial
Highlights) on pages 44 to 50 report on the activities and results
for the year and give an indication of the Company’s future
developments. The Corporate Responsibility Report is set out
on pages 58 to 63. A description of the principal risks and
uncertainties facing the Group is included on pages 54 to 56.
The Corporate Governance statement is set out on pages 71
to 75. The sections of the Annual Report referred to above fulfil
the requirements of the business review and are incorporated
by reference and shall be deemed to form part of this report.
Principal activities
Burberry Group plc is a holding company. The Group designs,
sources, and markets luxury men’s, women’s and children’s
clothing and non-apparel accessories globally through a
diversified network of retail, wholesale, franchise and digital
commerce channels worldwide. Burberry also licenses third
parties to manufacture and distribute products using the
‘Burberry’ trademarks.
Revenue and profit
Revenue from the continuing business during the period
amounted to £1,501.3m (2010: £1,185.1m). The attributable
profit for the year was £208.4m (2010: £81.4m).
Dividends
The directors recommend that a final dividend of 15.0p per
ordinary share (2010: 10.5p) in respect of the year to 31 March
2011 be paid on 4 August 2011 to those persons on the Register
of Members as at 8 July 2011.
An interim dividend of 5.0p per ordinary share was paid to
shareholders on 28 January 2011 (2010: 3.5p). This will make
a total dividend of 20.0p per ordinary share in respect of the
financial year to 31 March 2011. The aggregate dividends paid
and recommended in respect of the year to 31 March 2011 total
£87.1m (2010: £60.8m).
Directors
The names and biographical details of the directors holding office
at the date of this report are set out on page 67 and are incorporated
by reference into this report.
At the 2011 Annual General Meeting, the Company will adopt
early the provisions of the new UK Corporate Governance Code
that relate to the annual re-election of directors. All of the directors
will retire and, being eligible, will offer themselves for re-election.
The Notice of this year’s Annual General Meeting, and the
Corporate Governance section on pages 71 to 75, set out why
the Board believes the directors should be re-elected. Details of
Directors’ share interests
Interests of the directors holding office at 31 March 2011
in the shares of the Company are shown in the Directors’
Remuneration Report on page 85. There were no changes
to the beneficial interests of the directors during the period
31 March 2011 to 25 May 2011.
Directors’ insurance and indemnities
The Company maintains directors’ and officers’ liability insurance
which gives appropriate cover for any legal action brought against
its directors. In accordance with section 236 of the Companies Act
2006, qualifying third-party indemnity provisions are in place for the
directors and Company Secretary in respect of liabilities incurred
as a result of their office, to the extent permitted by law. Both the
insurance and indemnities applied throughout the financial year
ended 31 March 2011 and as at the date of this report.
Share capital
Details of the issued share capital, together with details of
movements in the issued share capital of the Company during the
year, are shown in note 22 which is incorporated by reference and
deemed to be part of this report.
The Company has one class of ordinary share which carries no
right to fixed income. Each share carries the right to one vote at
general meetings of the Company. The ordinary shares are listed
at 31 March 2011, the Company had 435,811,738 ordinary
shares in issue, of which 77,215 were held as treasury shares.
In order to retain maximum flexibility, the Company proposes
to renew the authority granted by ordinary shareholders at the
Annual General Meeting in 2010, to repurchase a maximum of
10% of its issued share capital. Further details are provided in
the Notice of this year’s Annual General Meeting.
At the Annual General Meeting in 2010, shareholders approved
resolutions to allot shares up to an aggregate nominal value of
£72,000 and to give directors authority to allot shares for cash
other than pro rata to existing shareholders. Resolutions will
be proposed at this year’s Annual General Meeting to renew
these authorities.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid. There are no
specific restrictions on the size of holding nor on the transfer of
shares which are both governed by the general provisions of the
Articles of Association and prevailing legislation. The directors are
not aware of any agreements between holders of the Company’s
shares that may result in restrictions on the transfer of securities or
voting rights. The directors have no current plans to issue shares
other than in connection with employee share schemes.
Details of employee share schemes are set out in note 27.
The Burberry Group plc ESOP Trust has waived all dividends
payable by the Company in respect of the ordinary shares held
by it. In addition, the Burberry Group plc SIP Trust has waived
all dividends payable by the Company in respect of the
unappropriated ordinary shares held by it.
The total dividends waived in the year to 31 March 2011 were
in aggregate £0.05m (2010: £0.2m).
68
Burberry Group PLC annual report 2010/11
DIRECTORS’ report continued
With regard to the appointment and replacement of directors,
the Company follows the UK Corporate Governance Code and
is governed by its Articles of Association and the Companies
Act 2006.
Substantial shareholdings
As at 25 May 2011, the Company had been notified under Rule 5
of the Disclosure and Transparency Rules of the following major
interests in its issued ordinary share capital:
Blackrock Inc.
FMR LLC
Capital Research and
Management Company
Ameriprise Financial, Inc.
Schroders plc
JP Morgan Chase & Co
Massachusetts Financial
Services Company
Legal and General Group plc
Number of
ordinary shares
43,198,349
22,145,417
22,016,085
21,771,730
21,666,352
21,578,580
20,073,645
17,544,824
% of total
voting rights
9.92
5.08
5.05
5.01
4.99
4.99
4.61
4.02
Interests in own shares
Details of the Company’s interests in its own shares are set out
in note 22 to the financial statements.
Charitable donations
During the year to 31 March 2011, the Group donated £3m
(2010: £1.4m) for the benefit of charitable causes. These donations
principally comprised cash. Further information regarding the
charitable donations made during the year are contained in the
Corporate Responsibility report on pages 58 to 63.
Political donations
The Company made no political donations during the year in line with
its policy. In keeping with the Company’s approach in prior years,
shareholder approval is being sought at the forthcoming Annual
General Meeting, as a precautionary measure, for the Company and
its subsidiaries to make donations and/or incur expenditure which
may be construed as ‘political’ by the wide definition of that term
included in the relevant legislation. Further details are provided in
the Notice of this year’s Annual General Meeting.
Employment policies
Equal opportunities
The Group is committed to ensuring the consistent profitable
growth of its business and a policy of equal opportunity in
employment is integral to this commitment. The aims of the
Group’s policy are to ensure that the most capable job applicants
are recruited and the most competent employees in the Group
progress, irrespective of sex, race, ethnic origin, nationality, marital
status, age, religion, disability and sexual orientation. We are
committed to making the necessary adjustments to support the
employment of people with disabilities and provide training and
development to ensure they have the opportunity to achieve their
potential. In the situation where an employee becomes disabled
during their employment, the Group will endeavour to assist the
employee by offering additional training, adapting the job if
appropriate or by offering a transfer to another position.
Health and safety
The Group has a health and safety policy approved by the Board
and a Global Health and Safety Committee which is chaired by
the Executive Vice President, Chief Financial Officer. Each region
has a local committee which reports to the Global Committee.
There have been a number of internal and external audits carried
out to provide assurance. There has been no enforcement action
following a routine visit by inspectors.
Further information regarding the Group’s employment policies
is provided in the Corporate Responsibility report on pages 58
to 63.
Employee involvement
Employee communication
The Group believes that employee communication is important
in building strong relationships with, and in motivating and
retaining, employees. The Group makes use of various methods
and channels, all of which are implemented globally, including
face-to-face briefings, open discussion forums with senior
management, email and a corporate intranet to ensure that
matters of interest and importance are conveyed to employees
quickly and effectively. In addition, quarterly updates which
highlight the Group’s performance and its ongoing strategic
initiatives are webcast globally to every employee. Furthermore,
development of content such as videos and digital webpages to
communicate key initiatives, events and other brand messages
has further enhanced internal communication.
Employee share ownership
The Group recognises the importance of good relationships with
employees at all levels and runs incentive schemes and share
ownership schemes for the benefit of employees. Further details
of these schemes are set out in the Directors’ Remuneration
Report on pages 76 to 85.
The Group again intends, where possible, to invite employees
to take part in sharesave schemes. The Group also intends to
grant free share awards or cash based awards to all employees
during 2011/12.
Further details of the Group’s approach to employee involvement
and communications are provided in the Corporate Responsibility
Report on pages 58 to 63.
Financial instruments
The Group’s financial risk management objectives and policies
are set out within note 26 to the financial statements on pages
119 to 121. Note 26 also details the Group’s exposure to foreign
exchange, price, interest, credit and liquidity risks. These notes
are incorporated by reference and are deemed to form part
of this report.
Burberry Group PLC annual report 2010/11 69
DIRECTORS’ report continued
Creditor payment policy
For all trade creditors, it is the Company’s policy to:
• agree and confirm the terms of payment at the commencement
of business with that supplier;
• pay in accordance with contractual and other legal obligations;
and
• continually review the payment procedures and liaise with
suppliers as a means of eliminating difficulties and maintaining
a good working relationship.
The Company had no trade creditors at 31 March 2011 (2010: nil).
Significant contracts – change of control
Pursuant to the Companies Act 2006, the directors disclose that
in the event of a change of control in the Company the Group’s
£300m Revolving Credit Facility (dated 28 March 2011) could
become repayable.
In circumstances of change of control of the Company, Angela
Ahrendts may terminate her employment. Her entitlement in
respect of remuneration is set out on page 79 of the Directors’
Remuneration Report where Burberry terminates her service
agreement in circumstances where the Remuneration Committee
determines that Angela Ahrendts’ performance does not meet
the financial expectations of the Board or shareholders.
In circumstances where the Company’s shares cease to be listed,
Stacey Cartwright may, within three months from the cessation
of listing, terminate her employment on three months’ notice and
would be entitled to her base salary for a period of nine months
following termination.
Details of the service agreements of the executive directors are
set out on page 79 of the Directors’ Remuneration Report.
The provisions of the Company’s employee share plans and
awards may cause options and awards granted under such
plans to vest upon a change of control.
Essential contracts
The Group has a number of contractual arrangements with
suppliers (both of goods and services), wholesale customers,
licensees who manufacture and distribute products using the
Burberry trademarks, and franchisees. In addition, the Group
occupies leasehold premises for the purpose of conducting its
business. Whilst these arrangements are important to the
business of the Group, individually none of them is essential to
the business of the Group and does not require disclosure under
section 417(5)(c) of the Companies Act 2006.
Auditors
In accordance with section 418(2) of the Companies Act 2006,
each of the Company’s directors in office as at the date of this
report confirms that:
• so far as the director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
• he or she has taken all the steps that he or she ought to
have taken as a director in order to make himself or herself
aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
The Group’s auditors are PricewaterhouseCoopers LLP.
A resolution to re-appoint PricewaterhouseCoopers LLP as
auditors to the Company will be proposed at the forthcoming
Annual General Meeting.
Note 31 in the financial statements states the auditors’ fees for
both audit and non-audit work.
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position are
set out in the Business and Financial Review on pages 44 to 50,
along with details of the Group’s cashflows, liquidity position and
borrowing facilities. Financial risk management objectives, details
of financial instruments and hedging activities, and exposures to
credit risk and liquidity risk are described in note 26, pages 119
to 121.
The directors have reviewed the Group’s forecasts and
projections. These include the assumptions around the Group’s
products and markets, expenditure commitments, expected
cashflows and borrowing facilities. Taking into account reasonably
possible changes in trading performance, and after making
enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly they consider it
appropriate to adopt the going concern basis in preparing the
annual report and accounts.
Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of Slaughter and May, One Bunhill Row, London, EC1Y
8YY commencing at 9.30am on Thursday, 14 July 2011. The
Notice of this year’s Annual General Meeting will be available to
view on the Group’s website www.burberryplc.com.
The directors consider that all of the proposed resolutions to be
considered at the Annual General Meeting are in the best interests
of the Company and its shareholders as a whole and are most
likely to promote the success of the Company for the benefit of its
shareholders as a whole. The directors unanimously recommend
that shareholders vote in favour of each of the proposed
resolutions, as the directors intend to do in respect of their
own beneficial holdings.
By order of the Board
Michael Mahony
General Counsel and Secretary
25 May 2011
Registered Office:
Horseferry House
Horseferry Road
London
SW1P 2AW
Registered Number: 03458224
70
Burberry Group PLC annual report 2010/11
CORPORATE GOVERNANCE
Corporate Governance Statement
Dear Shareholder,
Your Board remains committed to high standards of corporate
governance which it considers to be central to the effective
management of the business and to maintaining the confidence
of investors. We take our role of ensuring the long-term success
of the Company very seriously.
On the following pages we set out our approach to governance
at Burberry. We explain how the Board and its Committees are
structured, how they operate and how their effectiveness is
evaluated. My role as Chairman is to provide leadership and
ensure that the Board is effective, which I strongly believe that
it is, and this was confirmed following an independent external
evaluation held during the year.
During the financial year ended 31 March 2011, and as at the
date of this report, Burberry complied in full with the relevant
provisions set out in section 1 of the UK Combined Code on
Corporate Governance (the ‘2008 Code’). This report, together
with the Directors’ Remuneration Report on pages 76 to 85,
provides details of how we have complied with the 2008 Code.
The Board intends to comply with the provisions of the new UK
Corporate Governance Code (the ‘2010 Code’) in full during the
financial year ended 31 March 2012. We are adopting early the
provisions relating to the annual re-election of directors and will be
proposing the relevant resolutions at the Annual General Meeting
in July.
The Board
The Board is collectively responsible for promoting the success
of the Company. The Board provides leadership for the Group
and concentrates its efforts on strategy, performance, governance
and internal control. As at the date of this report, the Board
has eight members: the Chairman, the Chief Executive Officer,
the Executive Vice President, Chief Financial Officer and five
independent non-executive directors.
The Board has a formal schedule of matters reserved to it for
decision and approval which include, but are not limited to:
• the Group’s business strategy;
• annual budget and operating plans;
• major capital expenditure, acquisitions or divestments;
• the systems of corporate governance, internal control and
risk management;
• the approval of the interim and annual financial statements; and
• any interim dividend and the recommendation of the
final dividend.
Any matters that are not within the schedule of matters reserved, and
do not fall within the terms of reference of the Board’s Committees,
are subject to the Company’s internal approval processes.
During the year the Board held six scheduled meetings, including
an in-depth session on strategic matters, and one ad hoc
meeting. All directors participate in discussions relating to the
Group’s strategy, financial and trading performance and risk
management. The Board considers that it met sufficiently often to
enable the directors to discharge their duties effectively.
The table below gives details of directors’ attendance at Board
and Committee meetings during the financial year ended
31 March 2011.
John Peace
Chairman
Attendance table
John Peace
Angela Ahrendts
Philip Bowman
Ian Carter
Stacey Cartwright
Stephanie George
David Tyler
John Smith
Scheduled
Board
Ad hoc
Scheduled
Audit
Committee
Ad hoc
Remuneration
Committee
Nomination
Committee
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
–
–
3/3
2/3
–
3/3
3/3
2/3
–
–
2/2
1/2
–
2/2
2/2
1/2
5/5
–
5/5
5/5
–
5/5
5/5
5/5
2/2
2/2
2/2
2/2
–
2/2
2/2
2/2
Any absences were due to unavoidable prior commitments.
Burberry Group PLC annual report 2010/11
71
CORPORATE GOVERNANCE continued
At the request of any non-executive director, the Chairman will
arrange meetings consisting of only the non-executive directors
to allow the opportunity for any concerns to be expressed. During
the year, the Chairman maintained regular contact and met with
the Senior Independent Director and other non-executive directors
outside formal board meetings.
The Board is chaired by John Peace. The Chairman is responsible
for leading the Board and for its effectiveness, including ensuring
there is an open culture which allows debate and constructive
challenge of the executive directors. Angela Ahrendts is the
Chief Executive Officer and is responsible for implementing the
strategy as agreed by the Board. The division of the roles and
responsibilities of the Chairman and Chief Executive Officer is
formally set out in writing and agreed by the Board. The major
commitments of the Chairman are detailed in his biography on
page 67 and have not changed during the year.
The Senior Independent Director, Philip Bowman, supports the
Chairman in his role and leads the non-executive directors in the
oversight of the Chairman and Chief Executive Officer. The Senior
Independent Director has a specific responsibility to be available
to shareholders if they have concerns which the normal channels
have failed to resolve or where such contact is inappropriate.
Board balance and independence
The non-executive directors are, in the opinion of the Board,
independent of management and free from any business
relationship which could materially interfere with the exercise
of their independent judgement. During the year under review,
the majority of the Board (excluding the Chairman) comprised
independent non-executive directors.
At the time of the 2011 Annual General Meeting, John Peace,
Philip Bowman and David Tyler will have served for nine years on
the Board. The Board does not feel that this compromises their
effectiveness, as they bring valuable insight and experience to
the Board’s deliberations. The external performance evaluation
conducted in the year reviewed the non-executive directors’
contributions and found that they continued to be effective.
The Board believes that Philip Bowman and David Tyler remain
independent as they continue to provide constructive challenge to
the Board’s decision making process. The Nomination Committee
will continue to keep the composition of the Board under review.
Board appointments
Board nominations are recommended to the Board by the
Nomination Committee under its terms of reference. All directors
have historically been subject to election by shareholders at the
Annual General Meeting following their appointment and have
been re-elected every three years thereafter in accordance
with the Company’s Articles of Association and the 2008 Code.
At the 2011 Annual General Meeting, the Company will adopt
early the provisions of the 2010 Code that relate to annual
re-election of directors and all of the directors will be offering
themselves for re-election.
The biographical details of the directors can be found on
page 67 of this Annual Report. The Board confirms that, following
formal performance evaluation conducted by an independent
external consultant, the performance of each of the directors
standing for re-election continues to be effective and
demonstrates commitment to their roles, including commitment
of time for Board and Committee meetings and any other duties.
Information and professional development
On appointment, directors receive a full, formal and tailored
induction, including meetings with members of the management
team and briefings on particular issues. In addition, directors are
furnished with an induction pack of information, which includes
key Group policies, guidance notes and information on corporate
governance matters.
As an ongoing process, directors are briefed and provided with
information concerning major developments affecting their roles
and responsibilities. In particular, the directors’ knowledge of the
Group’s worldwide operations is regularly updated by arranging
presentations from senior management throughout the Group.
The Chairman works closely with the Company Secretary
to ensure that the Board is supplied in a timely manner with
information in a form and of a quality appropriate to enable it
to effectively discharge its duties. Where there are occasions
when directors are unable to attend a meeting they have the
opportunity to review meeting papers and submit comments to
the relevant Chairman. Directors are also supplied with a monthly
management report, which provides information on operational
and financial performance and the Group’s business plans.
All directors have direct access to the advice and services of the
Company Secretary and all senior management. The appointment
and removal of the Company Secretary is a matter reserved for
the Board as a whole. Directors may obtain, in the furtherance of
their duties, independent professional advice, if necessary, at the
Group’s expense.
Board performance evaluation
The Board undertakes a formal and rigorous review of its
performance and that of its committees each financial year. In
the year under review the evaluation was led by an independent
external consultant, Dr Tracy Long of Boardroom Review. The
evaluation process involved comprehensive interviews with each
director and the Company Secretary and covered a range of
issues around board and committee processes, board roles and
responsibilities and individual effectiveness.
Feedback from the evaluation process was provided to the Board
in the form of a presentation at a Nomination Committee meeting
and a written report to the Board. The review considered the
outcomes of previous evaluations, the current composition and
responsibilities of the Board and each of its committees, together
with the frequency and structure of meetings. In addition, the
review considered the contribution and effectiveness of the
executive and non-executive directors. The review identified that
the Board had a number of strengths, including:
• they regularly considered and understood shareholders’
expectations;
• the culture and size of the Board was considered effective and
open, with a diverse range of skills and providing an appropriate
level of challenge; and
• the governance and support framework for the Board was
considered positive and effective.
72
Burberry Group PLC annual report 2010/11
CORPORATE GOVERNANCE CONTINUED
The review also suggested areas for further development, including:
• reviewing the succession planning framework;
• continuing to develop a wider understanding of the competitive
landscape and the consumer experience.
The Board has addressed both of these issues since the review
and will continue to do so going forward.
The feedback from the review was considered and it was
concluded that the Board and its Committees operate efficiently
and effectively.
The main roles and responsibilities of the Audit Committee are
set out in written terms of reference.
The Audit Committee is responsible for:
• reviewing financial statements and formal announcements
relating to the Group’s performance;
• reviewing the Group’s internal financial, operational and
compliance controls and risk management systems;
• monitoring and reviewing the effectiveness of the Group’s
internal audit function;
Conflicts of interest
The Board has authority to approve directors’ conflicts and
potential conflicts of interest and has adopted a policy and
procedures to manage and, where appropriate, to approve
such conflicts, which it believes operates effectively.
A review of situational conflicts which have been authorised is
undertaken by the Board annually. Following the review for the
financial year, the Board concluded that there is currently no
compromise to the independence of any director arising from
an external appointment or any outside commercial interest.
Committees
The Board is supported by a number of committees including the
following principal committees: Audit Committee, Remuneration
Committee and Nomination Committee. All the non-executive
directors are members of each of the principal committees of the
Board. The terms of reference of each of the principal committees
can be viewed on the Group’s website www.burberryplc.com.
The Committees, if they consider it necessary, can engage with
third-party consultants and independent professional advisors
and can call upon other resources of the Group to assist them
in developing their respective roles. In addition to the relevant
committee members and the Company Secretary, external advisors
and, on occasion, other directors attend committee meetings but
only at the invitation of the chairmen of the Committees.
Audit Committee
The Audit Committee comprises five independent non-executive
directors:
Philip Bowman (Chairman)
Ian Carter
Stephanie George
John Smith
David Tyler
• assessing the independence, objectivity and effectiveness
of the external auditors;
• developing and implementing policies on the engagement
of the external auditors for the supply of non-audit services;
• making recommendations for the appointment, reappointment
and removal of the external auditors and approving their
remuneration and terms of engagement;
• reviewing arrangements by which employees may, in
confidence, raise concerns about possible improprieties in
matters of financial reporting and other matters.
The Board is satisfied, in accordance with the provisions of the
2008 Code, that at least one member of the Audit Committee has
recent and relevant financial experience, given the nature of the
senior management positions held or previously held by Philip
Bowman, David Tyler and John Smith (see biographical details
on page 67).
The Audit Committee met five times during the year with three
scheduled meetings and two ad hoc meetings. The attendance
record of Committee members is recorded in the table on
page 71. At the invitation of the Chairman of the Audit Committee,
the Chairman of the Board, the Chief Executive Officer, the
Executive Vice President, Chief Financial Officer, the Director
of Audit and Risk Assurance, the Senior Vice President Group
Finance, the Director of Tax and the external auditors regularly
attend meetings. The Audit Committee is responsible for reviewing
and monitoring the effectiveness of the Group’s internal control
procedures and risk management systems. The Committee
reviewed the Group’s internal audit plan and approved the internal
audit plan for the financial year to 31 March 2011. In addition,
the Committee reviewed the adequacy of the ‘whistle blowing’
arrangements in place to enable employees to raise, in
confidence, any concerns they may have. The Committee
is satisfied that such arrangements remain appropriate.
External Audit
During the year, the Audit Committee reviewed the effectiveness
of the external audit process. The appointment of
PricewaterhouseCoopers as the Company’s auditors predated
the IPO of the Company in 2002. Further, given the elevation of
the Company to the FTSE100 Index in 2009 and the significant
geographical and financial expansion of the Company and the
Group, the Committee concluded that it was appropriate to
review the effectiveness of the external audit process by inviting
each of PricewaterhouseCoopers, Ernst & Young, KPMG and
Deloitte to tender for the appointment as the Company’s and
the Group’s external auditors.
Burberry Group PLC annual report 2010/11
73
CORPORATE GOVERNANCE continued
The Audit Committee, supported by senior management,
conducted a rigorous tender process focusing on quality,
resources, independence and value. The tendering firms
were invited to put forward a proposal to the Audit Committee,
following briefing meetings with key management and the Audit
Committee Chairman. Following the review of these proposals
by management and the Audit Committee Chairman, two firms,
PricewaterhouseCoopers and Ernst & Young, were selected
to present to the Audit Committee and such presentations
were made by the personnel which each firm proposed would
conduct the external audit. This included partners, directors
and managers from the respective firms. The team proposed
by PricewaterhouseCoopers was a different team from the one
which had conducted the audit for the year ended 31 March
2010. After careful consideration, the Audit Committee concluded
that the proposal from PricewaterhouseCoopers was the best
overall in terms of quality, resources, independence and value and
would better meet the Group’s requirements for external audit
services going forward.
The Audit Committee therefore recommended to the Board that
PricewaterhouseCoopers be retained as the Group’s external
auditors and that it should propose to shareholders that
PricewaterhouseCoopers LLP be re-appointed as the Group’s
external auditors at the forthcoming Annual General Meeting.
The Committee recognises that the independence of the auditors
is an essential part of the audit framework and the assurance that
it provides. The Committee monitors the types of non-audit work
that are undertaken by the external auditors, including receiving
regular reports on the type of work undertaken, to ensure that
their objectivity and independence are not compromised. Any
proposed non-audit assignments require prior approval and the
Committee receives a report at each meeting providing details
of non-audit assignments carried out by the external auditors
in addition to their normal work.
Details of the fees paid to the external auditors during the
financial year can be found in note 31 in the financial statements.
Nomination Committee
The Nomination Committee comprises:
John Peace (Chairman)
Angela Ahrendts
Philip Bowman
Ian Carter
Stephanie George
John Smith
David Tyler
The Nomination Committee is responsible for reviewing the
balance and composition of the Board and its committees and
for identifying and recommending appointments or renewal of
appointments to the Board. These regular reviews ensure that
the Group and the Board are able to draw from a complementary
balance of skills and experience and that there is in place an
appropriate plan for orderly succession to the Board. The procedure
for appointments is set out in the Committee’s terms of reference.
The Nomination Committee met twice during the year under
review. The table on page 71 gives details of directors’
attendance at these meetings.
During the year the Nomination Committee considered and
reviewed the structure and diversity of the Board and its
Committees, the Group’s succession planning arrangements
and the results of the performance evaluation. These
arrangements will be kept under review by the Committee.
The terms and conditions of appointment of non-executive
directors, including the expected time commitment, are available
for inspection at the Company’s registered office and will be made
available for 15 minutes before the Annual General Meeting and
during the meeting itself.
Remuneration Committee
The report of the Remuneration Committee is set out on pages
76 to 85.
Corporate Responsibility
Details of the Group’s approach to Corporate Responsibility are
given on pages 58 to 63.
Accountability and audit
The Board acknowledges that it should present a balanced
and understandable assessment of the Group’s position and
prospects. In this context, reference should be made to the
Statement of Directors’ Responsibilities on page 86, which
includes a statement in compliance with the 2008 Code regarding
the Group’s status as a going concern, and to the Report of the
Auditors on page 87 which includes a statement by the auditors
about their reporting responsibilities. The Board recognises that
its responsibility to present a balanced and understandable
assessment extends to interim and other price-sensitive public
reports and reports to regulators as well as to information
required to be presented by law.
Internal control
The Board acknowledges that it is responsible for the Group’s
system of internal control and the Audit Committee reviews its
effectiveness. Such a system is designed to manage rather
than eliminate the risk of failure to achieve business objectives
and can provide only reasonable and not absolute assurance
against material misstatement or loss. The Audit Committee
has reviewed the effectiveness of the key procedures which
have been established to provide internal control. As part of the
process that the Board has in place to review the effectiveness
of the internal control system, there are procedures designed
to capture and evaluate failings and weaknesses, and in the case
of those categorised by the Board as ‘significant’, procedures
exist to monitor that the necessary actions are being taken to
remedy failings.
In accordance with the revised guidance for directors on internal
control (‘the Revised Turnbull Guidance’), the Board confirms
that there is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Group. These include
those relating to social, environmental and ethical matters.
This process was in place throughout the year under review and
up to the date of approval of the Annual Report and Accounts.
The process is regularly reviewed by the Audit Committee
which reports its findings for consideration by the Board, and
is in accordance with the Revised Turnbull Guidance. The key
procedures operating within the Group are as follows:
74
Burberry Group PLC annual report 2010/11
CORPORATE GOVERNANCE CONTINUED
Risk assessment
The Group’s business objectives are incorporated into the annual
budgeting and planning cycle. Progress towards the achievement
of such objectives is monitored by a variety of financial measures
and non-financial performance indicators.
The Group Risk Committee of executive management meets
formally at least three times a year to re-evaluate risk and to
consider the work of the Internal Audit and Risk Assurance and
other assurance teams. During the year, the Committee met
on three occasions. The Director of Audit and Risk Assurance
attends these meetings.
The Board acknowledges that it is responsible for considering
operational, financial, compliance and other risks to the
business and has delegated responsibility for reviewing the
risk management procedures to the Audit Committee.
Control environment and control activities
The Group consists of a number of businesses, each with its
own management structure which forms part of the overall
management structure of the Group. The senior executives
of these units report to the executive directors.
The Group has established procedures for the delegation of
authorities for matters that are considered significant, either
because of their value or the impact on the Group, to ensure
that approval is considered at an appropriate level.
The Group’s trading units operate within a framework of policies
and procedures which are either already laid down or are being
established in organisation or authority manuals. Policies and
procedures cover key issues such as authorisation levels,
compliance with legislation and physical security.
The Group has implemented various strategies to deal with the
risk factors that have been identified. Such strategies include a
framework of internal control and the use of third-party services to
assist in monitoring specific issues. In addition, other approaches
are taken, such as insurance. Further information is set out in the
Risk section on pages 54 to 56.
Information and financial reporting
The Group has procedures in place to ensure that there is appropriate
internal control and risk management in relation to financial reporting
and the preparation of consolidated accounts.
The Group has a comprehensive system of budgetary control,
focused on monthly financial performance reporting which is at
an appropriately detailed level. A summary of results supported by
commentary and performance measures is provided to the Board
each month. The performance measures are subject to review
to ensure that they provide relevant and reliable indications of
business performance.
In relation to the preparation of consolidated accounts, the
procedures include maintaining a dedicated consolidated
financial reporting system, obtaining representations from
senior management of the relevant legal entities, and the review
and reconciliation of reported data at appropriate intervals.
A summary of the key business risks and relevant control
measures is submitted by the executive directors at each Audit
Committee meeting. The Audit Committee meets with both
external and internal auditors.
Monitoring
A range of procedures is used to monitor the effective application
of internal control within the Group. These include management
review and management confirmations of compliance with
standards and procedures as well as internal audit and other
specialist reviews. The Internal Audit department is responsible for
reporting to the Audit Committee on the effectiveness of internal
control systems.
Relations with shareholders
The Board recognises the importance of maintaining good
communications with its shareholders and does this through the
Annual Report, preliminary and interim announcements, interim
management statements, the Annual General Meeting and
through the additional processes described below.
The Chief Executive Officer and Executive Vice President,
Chief Financial Officer make presentations to institutional
shareholders and analysts immediately following the release of
the preliminary and interim results; these presentations are made
available on the Group’s website www.burberryplc.com.
The Company communicates with its institutional investors
frequently and regularly through a combination of formal meetings,
participation at investor conferences and informal briefings with
management. The Board is kept abreast of the views of major
shareholders by briefings from the Director of Investor Relations.
In addition, analysts’ notes and brokers’ briefings are also used
to achieve a wide understanding of investors’ views.
The non-executive directors, including the Senior Independent
Director, are available to meet with major shareholders to discuss
issues of importance to them, should a meeting be requested.
Annual General Meeting
2010 Annual General Meeting
In accordance with the provisions of the 2008 Code, the
Notice of the 2010 Annual General Meeting was sent to
shareholders at least 20 working days before the Meeting.
A poll vote was taken on each of the resolutions put before
shareholders. Shareholders approved a resolution to adopt
new Articles of Association which had been amended to take
account of the Companies’ (Shareholders’ Rights) Regulations
2009 and the final implementation of the Companies Act 2006.
All directors attended and the Chairman of the Board and the
chairmen of each of the committees were available to answer
shareholders’ questions.
2011 Annual General Meeting
Voting at the 2011 Annual General Meeting will be by way of poll.
The results of the voting at the Annual General Meeting will be
announced and details of the votes will be available to view on the
Group’s website www.burberryplc.com as soon as possible after
the meeting.
It is the intention that all directors, including the chairmen of the
Audit, Remuneration and Nomination Committees, will attend
the forthcoming Annual General Meeting and will be available
to answer shareholders’ questions.
Share capital
Further information about the Company’s share capital, including
substantial shareholdings, can be found in the Director’s Report
on pages 68 to 70.
Burberry Group PLC annual report 2010/11
75
DIRECTORS’ REMUNERATION REPORT
Dear Shareholder
2010/11 was an outstanding year, capping off an exceptional period for the Group. The Group achieved tremendous growth, outpacing
the recovery in the luxury sector. The Group delivered financial results very significantly ahead of budget and brokers’ forecasts even
though a significant amount of investment in the future of the Brand was carried out, which affected the year’s profits. A number of key
strategic milestones were achieved, providing a strong platform for future sustained performance.
Throughout the year, the Remuneration Committee considered the effectiveness of its incentive plans in rewarding employees for the
performance of the Group and ensuring the motivation and retention of a high performing executive team, while maintaining a balance
between cost and rewards for shareholders.
Against this background, the Committee awarded salary increases to the executive directors and senior management team for the first
time since April 2008, and agreed annual bonus pay outs at the maximum level for the 2010/11 year. The Restricted Share Plan and
Exceptional Performance Share Plan grants partially vested in 2010.
Much of the success since 2006 has been due to Angela Ahrendts’ leadership and strategic vision, which the Group regards as critical
over the next phase of its development. Following consultation with major shareholders, the Remuneration Committee granted Angela
an exceptional one-time award to ensure her leadership until 2015, when she will be entering her tenth year as Burberry’s Chief
Executive Officer.
As announced in 2010, the Remuneration Committee granted awards under the Freeshare Plan to all eligible employees, whether based
in the UK or overseas. We believe that this will encourage share ownership as well as giving all employees a stake in the continued
success of Burberry.
David Tyler
Chairman of the Remuneration Committee
Directors’ Remuneration Report
This report has been prepared on behalf of the Board by the Remuneration Committee. It has been prepared in accordance with the
Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the “Regulations”) issued under the
Companies Act 2006 (the “Act”) and it meets the relevant requirements of the Financial Services Authority’s Listing Rules.
The Remuneration Committee
The following directors served as members of the Remuneration Committee (the “Committee”) throughout the financial year ending
31 March 2011:
David Tyler (Chairman)
Philip Bowman
Ian Carter
Stephanie George
John Peace
John Smith
The Committee is responsible for setting the remuneration of the executive directors and the Chairman of the Board and monitors the level
and structure of senior executive pay. The terms of reference of the Committee are available on the Group’s website www.burberryplc.com.
The remuneration of the non-executive directors is a matter for the Board as a whole. No director is involved in any discussions as
to their own remuneration. During the year under review, the Committee met five times. Details of attendance at those meetings is
set out in the Corporate Governance Report on page 71.
At the invitation of the Committee, except where their own remuneration was being discussed, Angela Ahrendts (Chief Executive
Officer), Stacey Cartwright (Executive Vice President, Chief Financial Officer), Reg Sindall (Executive Vice President – Corporate
Resources), Michael Mahony (Senior Vice President – Commercial Affairs and General Counsel) and Anne-Soline Thorndike (Director
of Reward and Recognition) attended Committee meetings during the period under review and provided advice that materially assisted
the Committee.
On 1 February 2011 the Committee appointed Towers Watson following a review of remuneration advisors to assist with its
considerations. Towers Watson provides advice on the ongoing operation of employee and executive share plans together with
advice on executive remuneration. The terms of engagement between the Committee and Towers Watson set out that any additional
consulting services provided by Towers Watson to management must be reported on a regular basis to the Committee, and where an
actual or potential conflict may occur that such work is agreed by the Chairman of the Committee prior to commencement. Since their
appointment Towers Watson has provided market benchmarking information to management in relation to a small number of roles
which fall below the level subject to review by the Committee. Prior to the appointment of Towers Watson, advice had been provided
by Kepler Associates.
76 Burberry Group plc annual report 2010/11
DIRECTORS’ REMUNERATION REPORT continued
Remuneration policy
The Committee believes the Group’s remuneration should be competitive and strongly linked to performance, taking into account
the global markets in which it operates. The Group’s remuneration policy is based on the following principles:
•
•
•
remuneration should be closely aligned with shareholders’ interests through thoughtful selection of performance measures
(as described on pages 81 to 83), emphasis on variable pay and delivery of a significant proportion of remuneration in shares,
some of which are expected to be retained in accordance with the Group’s shareholding policy;
the overall remuneration framework should provide a balance between short and long-term business objectives. Variable pay for
executive directors includes (1) an annual cash bonus based on profit before tax (‘PBT’), and (2) long-term share-based incentives
linked primarily to increases in shareholder value and growth in PBT. Furthermore, the Burberry Co-Investment Plan encourages
executive directors and other senior executives to invest their annual cash bonus into shares over a further three-year period; and
total remuneration should be sufficient to attract, motivate and retain exceptional talent within the global luxury brands sector.
Total remuneration for executive directors and other senior executives is therefore benchmarked against the Group’s main global
competitors and comparable UK companies. The Committee recognises that for each executive the relative importance of each
of these benchmarks may be different. Benefits are based on competitive market practice for each executive, depending on
individual circumstances.
The Committee reviews the Group’s remuneration policy on a regular basis, taking into account the performance and growth of the
business and the global luxury goods sector. The Committee also considers the Group’s policy against regulatory developments,
shareholder expectations and market practice.
During its deliberations on executive remuneration, the Committee took into account the key elements of remuneration policy for
all employees worldwide, any merit increases and global participation in share schemes, including the Sharesave Scheme and the
recently reintroduced SIP and Freeshare plans.
Performance graph
The following graph shows the Total Shareholder Return (‘TSR’) for Burberry Group plc compared to the companies in the FTSE 100
Index assuming £100 was invested on 31 March 2006. Burberry became a member of the FTSE 100 Index on 10 September 2009
and prior to that had a market capitalisation close to that of companies at the lower end of the FTSE 100 Index.
Value of £100 Invested on 31 March 2006
Burberry
FTSE 100
£
300
250
200
150
100
50
0
2006
2007
2008
2009
2010
2011
Source: Datastream, Bloomberg
Burberry Group plc annual report 2010/11 77
DIRECTORS’ REMUNERATION REPORT continued
Elements of remuneration
Remuneration is structured such that for executive directors and other senior executives, performance-related elements represent
the majority of total potential remuneration. The mix of fixed and variable pay at target and maximum performance is illustrated below:
Chief Executive Officer
Executive Vice President,
Chief Financial Officer
Target
Fixed
Variable Cash
Variable Shares
Target
Fixed
Variable Cash
Variable Shares
Maximum
Fixed
Variable Cash
Variable Shares
Maximum
Fixed
Variable Cash
Variable Shares
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
Fixed = Base + Allowances
Variable Cash = Annual Bonus
Variable Shares = Matching Shares (assuming full co-investment) + RSP
(+ Annualised One-Off Award to Angela Ahrendts)
The Group implements its remuneration policy through the provision of the following elements:
Base salary
The Group aims to provide salaries which are competitive with those of comparable roles at global companies of a similar size and/or
global reach within the luxury goods sector and to a lesser extent comparable UK companies. These companies are representative of
Burberry’s competitors for executive talent. When making salary determinations, the Committee takes into account not only competitive
information but also each executive’s individual performance and overall contribution to the business during the year.
In 2010, the Committee awarded salary increases to the executive directors and senior management team for the first time since
April 2008.
Annual Bonus
Each year the Committee sets bonus targets by reference to internal and external expectations. Bonuses for executive directors are
currently based on PBT. The Committee believes that linking incentives to profitability helps to reinforce the Group’s strategy and long term
growth objectives. Targets are calibrated using benchmarks that include broker earnings estimates for Burberry and its competitors, latest
projections for the then current year, budget, strategic plan, and long-term financial goals. Actual bonus awards are subject to the discretion
of the Committee.
In relation to 2010/11, the Committee agreed annual bonus pay outs for the executive directors at the maximum level, as PBT was
significantly above the maximum targets set at the beginning of the financial year.
Share schemes and long-term incentive arrangements
The Group has a number of share schemes and long-term incentive arrangements in place:
• The Burberry Co-Investment Plan (the ‘Co-Investment Plan’)
• The Burberry Exceptional Performance Share Plan (the ‘EPP’)
• The Burberry Senior Executive Restricted Share Plan 2004 (the ‘RSP’)
• The Burberry Executive Share Option Scheme 2002 (the ‘Executive Share Option Scheme’)
• The Burberry Approved Savings-Related Share Option Scheme (the ‘Sharesave Scheme’)
• The Burberry Share Incentive Plan (the ‘SIP’) and International Freeshare Plan (the ‘Freeshare Plan’)
• A One-Off Award to Angela Ahrendts
Further information regarding these schemes can be found on pages 81 to 84 and also in note 27. No new awards were made under
the EPP and Executive Share Option Scheme in 2010/11.
78 Burberry Group plc annual report 2010/11
DIRECTORS’ REMUNERATION REPORT continued
Benefits and Allowances
Benefits for executive directors include private medical insurance, life assurance and long-term disability insurance. Executive directors
also receive car and clothing allowances.
Service agreements
Angela Ahrendts
Angela Ahrendts relocated from the US to the UK and commenced her employment with Burberry as an executive director on 9 January
2006 under a service agreement dated 10 October 2005. She was appointed Chief Executive Officer on 1 July 2006 for an indefinite period.
If Burberry terminates Angela Ahrendts’ service agreement in circumstances where there is not poor performance she would be entitled
to 12 months’ salary and 75% of her annual maximum bonus opportunity. She would also receive her pension contribution for 12 months
together with overseas allowances and, if applicable, relocation expenses. Any unvested awards under the RSP and unvested Matching
Share awards under the Co-Investment Plan will vest on a time apportioned basis subject to performance conditions.
If Burberry terminates the agreement without cause but in circumstances where the Committee determines that Angela Ahrendts’
performance or that of the Group does not meet the financial expectations of the Board or shareholders, her entitlements in respect
of salary and bonus will be reduced so that she will receive 12 months’ salary and 37.5% of her annual maximum bonus opportunity.
Angela Ahrendts may terminate the service agreement on six months’ notice.
Stacey Cartwright
Stacey Cartwright is employed by Burberry as Executive Vice President, Chief Financial Officer under a service agreement dated
17 November 2003. Her term of appointment commenced on 1 March 2004 for an indefinite period.
Burberry may terminate Stacey Cartwright’s appointment by giving 12 months’ notice. In such circumstances she will be entitled to payment
of salary and other benefits for a period of 12 months. Stacey Cartwright may terminate the service agreement on six months’ notice.
Upon termination, all share awards would be treated in accordance with the rules of the relevant plan.
On 1 April 2011, Stacey Cartwright was appointed a non-executive director of GlaxoSmithKline plc. It has been agreed that
Stacey Cartwright can retain the fees earned in connection with this appointment.
Audited information
Directors’ remuneration
Executive directors’ remuneration
The remuneration of the executive directors of Burberry Group plc in the period 1 April 2010 to 31 March 2011 is detailed below.
Aggregate emoluments
Angela Ahrendts
Year to 31 March 2011
Year to 31 March 2010
Stacey Cartwright
Year to 31 March 2011
Year to 31 March 2010
Total
Year to 31 March 2011
Year to 31 March 2010
Salary
£’000
Allowances
paid in cash
£’000
Bonus
£’000
Benefits
£’000
Aggregate
emoluments
£’000
990(1)
910
575
520
1,565
1,430
485(2)
387
172(2)
155
657
542
1,980(3)
1,820
863(4)
780
2,843
2,600
69
45
11
10
80
55
3,524
3,162
1,621
1,465
5,145
4,627
(1) During 2010/11, Angela Ahrendts made personal charitable donations totalling £82,750 to the Burberry Foundation.
(2) Allowances for Angela Ahrendts and Stacey Cartwright include a portion of their annual pension contribution which they elect to receive as a cash supplement, further details of
which are contained in the section below entitled “Executive directors’ pension entitlements”.
(3) Angela Ahrendts is eligible to receive an annual bonus not exceeding 200% of annual salary.
(4) Stacey Cartwright is eligible to receive an annual bonus not exceeding 150% of annual salary.
Burberry Group plc annual report 2010/11 79
DIRECTORS’ REMUNERATION REPORT continued
Executive directors’ pension entitlements
Angela Ahrendts
The Group makes an annual contribution equal to 30% of Angela Ahrendts’ base salary. She has elected that a portion be paid as
a cash supplement. For the year to 31 March 2011, the cash supplement was £98,500 (2010: Nil). The contribution paid into the
Burberry Defined Contribution Pension Plan was £198,500 (2010: £273,000).
Stacey Cartwright
Stacey Cartwright is entitled to an annual pension contribution equal to 30% of base salary. She has elected that a portion be paid
as a cash supplement. For the year to 31 March 2011, the cash supplement was £139,920 (2010: £123,420). The contribution paid
into her personal pension plan was £32,580 in the year to 31 March 2011 (2010: £32,580).
Chairman and non-executive directors’ remuneration
The Chairman’s remuneration is reviewed by the Committee. The fees for the non-executive directors are reviewed by the Board.
The structure of remuneration for the Chairman and non-executive directors is set by reference to market practice within the limits set
by the Articles of Association and was reviewed with effect from 1 August 2010. Prior to this, fees for the Chairman and non-executive
directors were reviewed on 23 March 2007.
The Chairman and non-executive directors are not eligible for performance related bonuses or share awards and no pension
contributions are made on their behalf.
The table below sets out the fee structure for the Chairman and non-executive directors as at 31 March 2011.
Chairman(1)
Senior Independent Director(2)
Board member
Audit Committee chairmanship
Remuneration Committee chairmanship
Attendance allowance(3)
Fee level £’000
350
90
70
25
20
2
(1) The Chairman is not eligible for Committee Chairmanship fees or attendance allowances.
(2) The Senior Independent Director is eligible for Committee Chairmanship fees and attendance allowances.
(3) Non-executive directors receive an attendance allowance for each meeting attended outside of their country of residence.
The non-executive directors serve under Letters of Appointment as detailed in the table below. Non-executive directors are appointed
for an initial three-year term, after which they may continue to serve subject to the Board’s discretion and re-election by shareholders
in accordance with the Company’s Articles of Association, subject to six months’ notice by either party. Fees paid to the Chairman
and non-executive directors during the year are set out in the table below.
John Peace
Philip Bowman
Ian Carter
Stephanie George
John Smith
David Tyler
Total
Letter of
appointment
dated
20 June 2002
11 June 2002
16 April 2007
23 January 2006
27 November 2009
20 June 2002
Year to 31 March 2011
£’000
Year to 31 March 2010
£’000
Allowances
–
2
10
12
2
2
28
Fees
330
107
65
65
65
83
715
Total
330
109
75
77
67
85
743
Total
290
90
59
67
18
70
594
80 Burberry Group plc annual report 2010/11
DIRECTORS’ REMUNERATION REPORT continued
Share schemes and long-term incentive arrangements
The Co-Investment Plan
The Group encourages executive directors and other senior executives to hold shares in Burberry Group plc. To facilitate this, executive
directors and other senior executives may, at the invitation of the Committee, defer receipt of all or part of their annual bonus and invest
it in Burberry shares, with up to a 2:1 match based on Group performance during the year. The Matching Share awards, which are
structured as nil-cost options, do not vest for three years and are forfeited if the executive resigns within that period. To further link pay
and performance, and to align remuneration with shareholders’ interests, Matching Share awards granted after 31 March 2009 are
subject to secondary performance conditions: 25% of an award may vest if growth in PBT achieves 5% per annum over three years,
100% may vest if PBT growth exceeds 7% per annum, with vesting occurring on a straight line basis between these points. None of
the award shall vest if PBT growth is below 5% per annum.
For the year ended 31 March 2010, Angela Ahrendts and Stacey Cartwright chose to defer and invest the whole of their bonus after the
deduction of tax into Burberry shares via the Co-Investment Plan. The Invested Shares are included in the table below and in the table of
directors’ interests appearing on page 85. The related Matching Share awards under these arrangements are also shown in the table below.
The interests of the executive directors in share awards granted under the Co-Investment Plan as at 31 March 2011 were as follows:
Released
during the
year
– 82,061(1)
–
Number of Invested Shares
Purchased
during the
year
As at
1 April
2010
Number of Matching Shares(2)
As at
31 March
2011
As at
1 April
2010
Awarded
during the
year
Exercised
during the
year
As at
31 March
2011 Vesting date Expiry date
Date of
grant
Angela
Ahrendts
20/06/2007
82,061
03/06/2008 135,434
–
– 135,434
–
416,086
–
–
09/06/2010
– 141,942
– 141,942
–
501,536
Total
217,495 141,942 82,061 277,376
416,086
501,536
Stacey
Cartwright
20/06/2007
03/06/2008
37,637
60,228
– 37,637(1)
–
–
–
60,228
185,036
–
–
09/06/2010
–
60,832
60,832
–
214,944
Total
97,865
60,832 37,637 121,060
185,036
214,944
–
–
–
–
–
–
–
–
– 02/03/2010
416,086 03/06/2011
19/06/2012
02/06/2013
501,536 09/06/2013
08/06/2015
917,622
– 02/03/2010
19/06/2012
185,036 03/06/2011
02/06/2012
214,944 09/06/2013
08/06/2015
399,980
(1) Upon the third anniversary of the date of grant of the Matching Share awards, the Invested Shares are no longer subject to restrictions.
(2) The Matching Share awards are awarded on a gross basis and are taxed at the point of exercise. The market value of these awards at the date of grant (9 June 2010)
was 725.77p per share.
The EPP
The EPP is a one-off long-term incentive plan introduced in 2007, the purpose of which was to incentivise senior management to
achieve stretching goals and to help provide exceptional reward for exceptional performance. Awards granted under the EPP, which
are structured as nil-cost options, are subject to performance conditions based 50% on relative TSR performance and 50% on growth
in adjusted PBT over the three and four-year performance periods to 31 March 2010 and 31 March 2011. Awards do not vest unless
Burberry’s TSR exceeds the median of the comparator group or PBT growth exceeds 50% over the four-year performance period to
2010 or 75% over the five-year performance period to 2011. For the performance period to 2010, maximum vesting required Burberry’s
TSR to outperform the median of its peers by at least 8% per annum and PBT growth of at least 75%. For the performance period to
2011, maximum vesting requires Burberry’s TSR to outperform the median of its peers by at least 7% per annum and PBT growth of at
least 100%. Vesting against each metric occurs on a straight line basis between threshold and maximum. Of the shares which vest
based on the achievement of the performance conditions, 50% vest on the third anniversary of the date of grant based on performance
to 2010 and the remaining 50% vest on the fourth anniversary of the date of grant based on performance to 2011.
The TSR group for this award comprised Bulgari, Coach, Compagnie Financière Richemont, Estée Lauder, Fossil, Geox, Hermès
International, Hugo Boss, Inditex, Liz Claiborne, Luxottica Group, LVMH Moët Hennessy Louis Vuitton, Nike, Nordstrom, Polo Ralph
Lauren, PPR, Saks, Swatch, Tiffany & Co, and Tod’s.
In reviewing the EPP award vesting in 2010, the Committee took into account the relative financial performance achieved and the
excellent progress in implementation of the medium term business plan. The Committee chose, after notifying major shareholders,
to use a local currency basis to determine vesting of the relative TSR element. The portion of the award due to vest in 2011 will be
calculated in the same manner.
Burberry Group plc annual report 2010/11 81
DIRECTORS’ REMUNERATION REPORT continued
The interests of the executive directors in share awards granted under this plan as at 31 March 2011 were as follows:
Angela Ahrendts
26/07/2007
Date of
grant
Stacey Cartwright
26/07/2007
Number of ordinary shares
As at
1 April
2010
Lapsed
during the
year
295,375(1)
–
121,625(1)
–
Exercised
during the
year
129,625(2)
–
53,375(3)
–
425,000
425,000
175,000
175,000
Total
1,200,000
417,000
183,000
As at
31 March
2011
–
425,000
–
175,000
600,000
Vesting date
Expiry date
26/07/2010
26/07/2011
26/07/2010
26/07/2011
25/07/2012
25/07/2012
25/07/2012
25/07/2012
(1) Following the calculation of the achievement of the performance conditions attaching to the awards vesting on 26 July 2010, whereby the relative TSR target was partially met
and the PBT growth measure was not met, 69.5% of these awards lapsed.
(2) The market value of Burberry shares on the date of exercise (6 August 2010) was 865.1p.
(3) The market value of Burberry shares on the date of exercise (23 November 2010) was 1,017.8p.
The RSP
Under the RSP which was introduced in 2004, executives may be awarded shares, structured as nil-cost options, up to a maximum
value of two times base salary per annum. The vesting of awards granted under the RSP is based 50% on Burberry’s three-year TSR
relative to its peers and 50% on three-year growth in PBT.
Awards granted between 2004 and 2007 vest in full only if Burberry achieves at least upper quartile TSR relative to its global peers and
at least 15% per annum PBT growth. A proportion of an award (12.5%) may vest if TSR performance exceeds the median of the peer
group or if PBT growth exceeds 5% per annum over three years. Vesting against each metric occurs on a straight line basis between
threshold and maximum. Of the shares which meet the performance criteria, 50% vests after three years. The remaining 50% vests in
two equal tranches on the fourth and fifth anniversaries of the date of grant.
Awards granted in 2009 and 2010 will vest in full only if Burberry achieves at least upper quartile TSR relative to its global peers and at
least 10% per annum PBT growth. A proportion of an award (12.5%) may vest if TSR performance exceeds the median of the peer
group or if PBT growth exceeds 3% per annum over three years. Vesting against each metric occurs on a straight line basis between
threshold and maximum. Of the shares which meet the performance criteria, 50% vests after three years. The remaining 50% vests in
two equal tranches on the fourth and fifth anniversaries of the date of grant. The Committee believes that these performance conditions
were as challenging, given the significant changes in the economic environment, as those set when the RSP was adopted in 2004.
The Committee chose TSR relative to a group of Burberry’s peers because it provides an objective measure of the Group’s success
and aligns with shareholder interests. Growth in PBT was chosen as it continues to be the primary measure used by management and
the Committee believes strong growth in pre-tax profit is key to delivering superior shareholder returns.
The TSR group for awards granted in 2004 and 2005 comprised Barneys New York, Bulgari, Christian Dior, Coach, Compagnie
Financière Richemont, Hermès International, Hugo Boss, IT Holding, LVMH Moët Hennessy Louis Vuitton, Movado, Neiman-Marcus,
Polo Ralph Lauren, PPR, Saks, Swatch, Tiffany & Co, Tod’s, Tommy Hilfiger and Waterford Wedgewood. Barneys New York, Neiman-
Marcus and Tommy Hilfiger ceased to be listed and were replaced in 2006 by Estee Lauder, Fossil, Liz Claiborne and Nordstrom.
Following review by the Committee in 2007, Christian Dior, IT Holding, Movado and Waterford Wedgewood were replaced by Geox,
Inditex, Luxottica Group and Nike.
82 Burberry Group plc annual report 2010/11
DIRECTORS’ REMUNERATION REPORT continued
The interests of the executive directors in share awards granted under this plan as at 31 March 2011 were as follows:
Angela Ahrendts
Date of
grant
As at
1 April
2010
11/06/2007 255,987
01/06/2009 450,000
Number of ordinary shares
Lapsed
during the
year(3)
Granted
during the
year(2)
– 147,193
–
–
Exercised
during the
year
54,397(4)
–
Vesting period(1)
As at
31 March
2011
From
To Expiry date
54,397
450,000
11/06/2010 11/06/2012 10/06/2017
01/06/2012 01/06/2014 31/05/2019
Total
705,987
– 147,193
54,397
504,397
Stacey Cartwright 10/08/2006
27/11/2006
11/06/2007
10,076
2,521
74,098
01/06/2009 265,000
–
–
–
–
10/06/2010
–
78,000
–
–
42,607
–
–
–
–
15,745(5)
–
10,076
2,521
10/08/2009 10/08/2011 09/08/2016
27/11/2009 27/11/2011 26/11/2016
15,746
11/06/2010 11/06/2012 10/06/2017
265,000
01/06/2012 01/06/2014 31/05/2019
–
78,000
10/06/2013 10/06/2015 09/06/2020
Total
351,695
78,000
42,607
15,745
371,343
(1) Subject to performance testing.
(2) The market value of Burberry shares on the date of grant (10 June 2010) was 784p.
(3) Following the calculation of the achievement of the performance conditions attaching to these awards, 57.5% lapsed.
(4) The market value of Burberry shares on the date of exercise (6 August 2010) was 865.1p.
(5) The market value of Burberry shares on the date of exercise (23 November 2010) was 1,017.8p.
One-Off Award to Angela Ahrendts
Following consultation with the Company’s major shareholders, the Remuneration Committee granted Angela Ahrendts a one-off nil
cost option over ordinary shares on 8 December 2010. This option is due to vest on 1 April 2015 and then only if strategic and financial
objectives linked to the long term growth of the Company have been met. These are specifically: the strategic development of the
business measured against the strategic plan approved by the Board from time to time; Burberry’s financial performance which will be
assessed by reference to the PBT condition applied to awards made under the Co-Investment Plan in June 2010 (subject to adjustment
to reflect the prevailing economic climate during the vesting period if appropriate); the personal contribution made by Angela Ahrendts;
the shareholder value delivered in the context of the evolution of the luxury goods markets operated in by Burberry during the
period between grant and vesting and any other performance factors which are appropriate in assessing the fairness of vesting the
award to the executive and the shareholders. The Committee will review progress against the performance condition at the end of
each financial year during the vesting period.
The interests of Angela Ahrendts in shares subject to this award as at 31 March 2011 were as follows:
Number of ordinary shares
Vesting period(1)
Date of
grant
As at
1 April
2010
Granted
during the
year(2)
Lapsed
during the
year
Exercised
during the
year
As at
31 March
2011(3)
From
To Expiry date
Angela Ahrendts
08/12/2010
–
500,000
–
– 500,000
01/04/2015 31/03/2016 31/03/2016
(1) Subject to performance testing.
(2) The market value of Burberry shares on the date of grant (8 December 2010) was 1,156p.
In the event of a change of control, awards will be performance tested and pro-rated for time, subject to a maximum time based
reduction of 50%, or may be rolled over subject to Angela Ahrendts’ agreement. If Burberry terminates the agreement without cause,
or Angela Ahrendts leaves for good reason, the option will be exercisable in full. If Angela Ahrendts ceases to be an employee for cause,
for performance reasons or as a consequence of voluntary resignation, the option will lapse.
Burberry Group plc annual report 2010/11 83
DIRECTORS’ REMUNERATION REPORT continued
The Sharesave Scheme
In order to encourage employee share ownership at all levels, the Group offers a Sharesave Scheme. The Sharesave Scheme offers
executive directors and eligible employees an opportunity to enter into a long-term savings contract to save a portion of their salary
which can be used to purchase Burberry Group plc shares at up to a 20% discount to the market price at the date of invitation.
Where it is not possible to offer a Sharesave Scheme in countries due to regulatory issues, or where the number of employees based
in that country would make its introduction financially unviable, the Group offers a cash-based scheme as an alternative.
The interests of the executive directors in options granted under the Sharesave Scheme are shown in the table below:
Number of ordinary shares
Exercise period
Date of
grant
As at
1 April
2010
Granted
during the
year (1)
Lapsed
during the
year
Exercised
during the
year
As at
31 March
2011
Angela Ahrendts
25/06/2010
–
2,773
Stacey Cartwright 30/06/2009
2,827
–
–
–
–
–
2,773
2,827
(1) The market value of Burberry shares on the date of grant (25 June 2010) was 784.5p.
Exercise
price (p)
557.0
321.0
From
To
01/09/2015 28/02/2016
01/09/2012 28/02/2013
The SIP and the Freeshare Plans
The executive directors do not participate in the Freeshare Plan and elected not to participate in the SIP.
Dilution Limits
The Group’s share schemes contain limits that govern the quantum of awards that may be granted and the amount of newly issued
shares that may be used to satisfy such awards. These limits are in line with the guidance of the Association of British Insurers in that no
more than 10% of the Group’s issued share capital may be allocated under the Group’s relevant schemes over a rolling ten year period.
Shareholding Policy
The Committee believes that share ownership provides an effective way to align the interests of executives with those of shareholders.
The Group introduced a Shareholding Policy in 2007. Certain senior executives are expected to achieve an interest in Burberry shares
equivalent to at least one times base salary over the five year period to 2012. Executives are expected to retain a proportion of the shares
acquired on the exercise of options and awards until such guidelines are met. The Chief Executive Officer and Executive Vice President,
Chief Financial Officer are expected to hold an interest in shares with a value equivalent to at least three times and one and a half times
base salary respectively by 2012. As at 31 March 2011, both the Chief Executive Officer and the Executive Vice President, Chief Financial
Officer have complied with the policy.
As part of the Group’s Shareholding Policy, the Chairman and non-executive directors are expected to hold shares with a market
value of a minimum of £6,000 for each year of their appointment. The Chairman and non-executive directors have complied with
this policy.
Gains made by directors on share options and awards
The table below shows notional gains made by individual directors from the exercise of share options and awards during the year
to 31 March 2011. The gains are calculated by reference to the market value of Burberry’s shares on the date of exercise.
Angela Ahrendts
Stacey Cartwright
Number of ordinary shares
Exercised
during the year
Retained as at
31 March 2011
184,022
69,120
89,935
33,770
Notional gain in
the year to
31 March 2011
£’000
1,574
697
84 Burberry Group plc annual report 2010/11
DIRECTORS’ REMUNERATION REPORT continued
Directors’ interests
The beneficial interests of the directors in the ordinary shares of Burberry Group plc (in addition to interests in options and share awards)
are shown below:
Angela Ahrendts
Philip Bowman
Ian Carter
Stacey Cartwright
Stephanie George
John Peace
John Smith
David Tyler
Holding of
ordinary
shares as at
31 March
2011
351,466(1)
65,000
26,690
499,041(1)
15,000
175,738
1,011
60,000
Holding of
ordinary
shares as at
31 March
2010
431,939(1)
65,000
26,690
404,439(1)
3,700
175,738
1,011
60,000
(1) Includes Invested Shares under the Co-Investment Plan.
As potential beneficiaries under the Burberry Group plc ESOP Trust (the ‘Trust’) Angela Ahrendts and Stacey Cartwright are deemed
to have an interest in the Company’s ordinary shares held by the Trust. The Trust held 212,017 ordinary shares as at 31 March 2011
(2010: 228,492). There have been no further changes in the above interests between 31 March 2011 and 25 May 2011.
There are no other non-beneficial interests.
Share Price
The market value of Burberry Group plc shares on 31 March 2011 was 1,174p. The highest and lowest market prices of an ordinary
share in the year were 1,203p and 612.5p, respectively.
Audit statement
In their audit opinion on page 87, PricewaterhouseCoopers LLP refer to their audit of the disclosures required by Schedule 8 to the
Regulations. These comprise the following disclosures in this remuneration report: the disclosures under the headings ‘Executive
directors’ remuneration’, ‘Executive directors’ pension entitlements’, ‘Chairman and non-executive directors’ remuneration’,
‘The Co-Investment Plan’, ‘The EPP’, ‘The RSP’, ‘One-Off Award to Angela Ahrendts’ and ‘The Sharesave Scheme’ and the
disclosures under the heading, ‘Directors’ interests’ on pages 79 to 85.
Approved by the Board and signed on its behalf by:
David Tyler
Chairman of the Remuneration Committee
25 May 2011
Burberry Group plc annual report 2010/11 85
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared
the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union, and the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and
of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Group and parent Company financial statements respectively; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them
to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the directors, whose names and functions are listed on page 67 confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and profit of the Group; and
• the Directors’ Report contained on page 68 includes a fair review of the development and performance of the business and the
position of the Group, together with a description of the principal risks and uncertainties that it faces.
86
Burberry Group PLC annual report 2010/11
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
BURBERRY GROUP PLC
We have audited the Group financial statements of Burberry Group plc for the year ended 31 March 2011 which comprise the Group
Income Statement, the Group Statement of Comprehensive Income, the Group Balance Sheet, the Group Statement of Changes in
Equity, the Group Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 86, the directors are responsible for the
preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation
of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 March 2011 and of its profit and cash flows for the year
then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared
is consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 70, in relation to going concern;
• the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the June 2008
Combined Code specified for our review; and
• certain elements of the report to shareholders by the Board on directors’ remuneration.
Other matter
We have reported separately on the parent Company financial statements of Burberry Group plc for the year ended 31 March 2011
and on the information in the Directors’ Remuneration Report that is described as having been audited.
Andrew Kemp (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, 25 May 2011
Burberry Group PLC annual report 2010/11 87
GROUP INCOME STATEMENT
Continuing operations
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Financing
Interest receivable and similar income
Interest payable and similar charges
Other financing charges
Net finance charge
Profit before taxation
Taxation
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Attributable to:
Equity holders of the Company
Non-controlling interest
Profit for the year
Earnings per share
– basic
– diluted
Earnings per share from continuing operations
– basic
– diluted
Reconciliation of adjusted profit before taxation:
Profit before taxation
Exceptional items:
– restructuring (credit)/charge relating to continuing operations
– put option liability finance charge
Adjusted profit before taxation – non-GAAP measure
Adjusted earnings per share – non-GAAP measure
– basic
– diluted
Dividends per share
– interim
– proposed final (not recognised as a liability at 31 March)
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
1,501.3
(491.6)
1,009.7
(707.6)
302.1
1,185.1
(423.9)
761.2
(544.7)
216.5
1.9
(5.1)
(3.2)
(6.4)
295.7
(83.2)
212.5
(6.2)
206.3
208.4
(2.1)
206.3
47.9p
46.9p
49.3p
48.3p
1.1
(6.2)
–
(5.1)
211.4
(58.8)
152.6
(70.4)
82.2
81.4
0.8
82.2
18.8p
18.4p
35.1p
34.4p
£m
£m
295.7
211.4
(1.0)
3.2
297.9
49.9p
48.9p
3.4
–
214.8
35.9p
35.1p
5.00p
15.00p
3.50p
10.50p
Note
3
4
6
5
7
29
8
8
8
8
5
5
8
8
9
9
(1) The results for the year to 31 March 2010 have been re-presented to show the results of the discontinued Spanish operations separately.
88
Burberry Group PLC annual report 2010/11
GROUP STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive income:
– cash flow hedges
– foreign currency translation differences
Tax on other comprehensive income:
– cash flow hedges
– foreign currency translation differences
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interest
Note
22
Year to
31 March
2011
£m
206.3
Year to
31 March
2010
£m
82.2
4.9
(15.3)
(1.4)
2.0
(9.8)
196.5
198.8
(2.3)
196.5
17.3
(6.7)
(5.0)
(6.6)
(1.0)
81.2
79.8
1.4
81.2
Burberry Group PLC annual report 2010/11 89
GROUP BALANCE SHEET
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Deferred tax assets
Trade and other receivables
Derivative financial assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Income tax receivables
Cash and cash equivalents
Assets classified as held for sale
Total assets
LIABILITIES
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Derivative financial liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Current liabilities
Bank overdrafts and borrowings
Derivative financial liabilities
Trade and other payables
Provisions for other liabilities and charges
Income tax liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves attributable to the Company’s equity holders
Ordinary share capital
Share premium account
Capital reserve
Hedging reserve
Foreign currency translation reserve
Retained earnings
Non-controlling interests in equity
Total equity
As at
31 March
2011
£m
As at
31 March
2010
£m
Note
10
11
12
13
14
16
15
14
16
17
29
18
13
16
19
20
21
16
18
20
22
22
22
22
114.7
281.8
3.0
70.4
15.2
9.2
64.6
256.1
–
39.2
11.0
1.7
494.3
372.6
247.9
132.5
1.6
8.3
466.3
856.6
13.5
870.1
1,364.4
(84.4)
(1.8)
–
(0.6)
(9.6)
(96.4)
(168.4)
(3.9)
(283.4)
(18.6)
(60.0)
(534.3)
(630.7)
733.7
0.2
192.5
28.9
2.4
123.2
366.4
713.6
20.1
733.7
166.9
128.4
2.6
0.7
468.4
767.0
–
767.0
1,139.6
(26.5)
(1.6)
(0.2)
(0.5)
(5.5)
(34.3)
(206.4)
(9.0)
(200.2)
(34.4)
(51.8)
(501.8)
(536.1)
603.5
0.2
186.1
27.2
(1.1)
136.3
241.4
590.1
13.4
603.5
The consolidated financial statements of Burberry Group plc (registered number 03458224) on pages 88 to 132 were approved by the
Board on 25 May 2011 and signed on its behalf by:
John Peace
Chairman
Stacey Cartwright
Executive Vice President, Chief Financial Officer
90
Burberry Group PLC annual report 2010/11
GROUP STATEMENT OF CHANGES IN EQUITY
Ordinary
share
capital
£m
Note
Attributable to owners
of the Company
Share
premium
account
£m
Other
reserves
£m
0.2
175.9
164.0
0.2
186.1
162.4
–
17.3
(7.3)
(11.6)
–
–
–
–
–
–
–
–
–
4.9
(15.1)
0.6
Retained
earnings
£m
199.2
81.4
–
–
–
Non-
controlling
interest
£m
4.6
0.8
–
0.6
–
Total
£m
539.3
81.4
17.3
(7.3)
(11.6)
Total
equity
£m
543.9
82.2
17.3
(6.7)
(11.6)
(1.6)
81.4
79.8
1.4
81.2
18.1
18.1
9.3
(8.3)
(7.5)
(0.4)
2.1
–
9.3
1.9
(7.5)
(0.4)
2.1
–
(52.5)
(52.5)
241.4
208.4
590.1
208.4
–
–
–
4.9
(15.1)
0.6
(9.6)
1.7
208.4
198.8
(1.7)
–
–
–
–
–
–
–
–
–
–
–
28.3
(0.7)
15.2
(5.6)
(6.6)
0.3
–
28.3
(0.7)
15.2
0.8
(6.6)
0.3
–
(45.2)
(45.2)
–
–
(67.4)
(67.4)
–
–
–
–
–
–
7.4
–
13.4
(2.1)
–
(0.2)
–
(2.3)
–
–
–
–
–
–
–
3.3
–
7.0
(1.3)
18.1
9.3
1.9
(7.5)
(0.4)
2.1
7.4
(52.5)
603.5
206.3
4.9
(15.3)
0.6
196.5
–
28.3
(0.7)
15.2
0.8
(6.6)
0.3
3.3
(45.2)
7.0
(68.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.4
–
–
–
–
–
–
22
22
22
Balance as at 1 April 2009
Profit for the year
Other comprehensive income:
Cash flow hedges
Foreign currency translation differences
Tax on other comprehensive income
Total comprehensive (expense)/income
for the year
Transactions with owners:
Employee share incentive schemes
– value of share options granted
– tax on share options granted
– exercise of share options
Purchase of own shares by ESOP trusts
Treasury shares
Sale of own shares by ESOP trusts
Capital contribution by non-controlling interest
Dividends paid in the period
Balance as at 31 March 2010
Profit/(Loss) for the year
Other comprehensive income:
Cash flow hedges
Foreign currency translation differences
Tax on other comprehensive income
Total comprehensive (expense)/income
for the year
Transfer between reserves
Transactions with owners:
Employee share incentive schemes
– value of share options granted
– value of share options transferred to liabilities
– tax on share options granted
– exercise of share options
Purchase of own shares by ESOP trusts
Sale of own shares by ESOP trusts
Business combinations
Liability on put option over non-controlling
interest
Capital contribution by non-controlling interest
Dividends paid in the period
Balance as at 31 March 2011
0.2
192.5
154.5
366.4
713.6
20.1
733.7
Burberry Group PLC annual report 2010/11
91
GROUP STATEMENT OF CASH FLOWS
Cash flows from operating activities
Operating profit
Operating loss from discontinued operations
Depreciation
Amortisation
Write-down of assets held for sale
Net impairment charges
Loss on disposal of property, plant and equipment and intangible assets
Fair value gains on derivative instruments
Charges in respect of employee share incentive schemes
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase in payables
Cash generated from operating activities
Interest received
Interest paid
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets
Acquisition of subsidiary, net of cash acquired
Capital contributions by non-controlling interests
Net cash outflow from investing activities
Cash flows from financing activities
Dividends paid in the year
Dividends paid to non-controlling interest
Issue of ordinary share capital
Sale of own shares by ESOP trusts
Purchase of own shares by ESOP trusts
Proceeds from borrowings
Repayments of borrowings
Derivatives matured during the year and remaining in equity
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Effect of exchange rate changes
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
ANALYSIS OF NET CASH
Cash and cash equivalents per the Balance Sheet
Bank overdrafts
Cash and cash equivalents per the Statement of Cash Flows
Drawn down borrowings
Effect of exchange rate changes on foreign currency borrowings
Bank and other borrowings
Net cash
92
Burberry Group PLC annual report 2010/11
Year to
31 March
2011
£m
Year to
31 March
2010
£m
Note
302.1
(6.2)
53.7
8.9
3.7
–
1.1
(6.2)
28.3
(58.9)
(11.4)
51.3
366.4
1.9
(5.1)
(98.1)
265.1
(108.4)
(51.9)
7.0
(153.3)
(67.4)
(1.3)
0.8
0.3
(6.6)
24.0
(24.1)
–
(74.3)
37.5
(1.5)
263.2
299.2
216.5
(45.4)
46.1
6.2
–
7.7
4.2
(11.9)
18.1
87.4
56.2
40.5
425.6
1.1
(6.1)
(51.3)
369.3
(69.9)
(2.0)
7.4
(64.5)
(52.5)
–
1.9
2.1
(7.5)
1.2
(39.7)
0.2
(94.3)
210.5
(0.3)
53.0
263.2
28
9
Note
17
21
21
As at
31 March
2011
£m
466.3
(167.1)
299.2
(1.2)
(0.1)
(1.3)
297.9
As at
31 March
2010
£m
468.4
(205.2)
263.2
(1.2)
–
(1.2)
262.0
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
Burberry Group (the Group) is a global luxury goods manufacturer, wholesaler and retailer. Burberry also licenses third parties to
manufacture and distribute products using the ‘Burberry’ trademarks. All of the companies which comprise the Group are owned
by Burberry Group plc (the Company) directly or indirectly.
The consolidated financial statements of the Group have been prepared in accordance with EU endorsed International Financial
Reporting Standards (IFRS), IFRS Interpretations Committee (IFRS IC) interpretations and parts of the Companies Act 2006 applicable
to companies reporting under IFRS. These consolidated financial statements have been prepared under the historical cost convention,
except as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.
The following new standard is mandatory for the first time for the financial year beginning 1 April 2010:
IFRS 3 (Revised) Business combinations
The standard continues to apply the acquisition method to business combinations, but with certain significant changes. All payments
to purchase a business are recorded at fair value at the acquisition date, with some contingent payments subsequently remeasured at
fair value through income. Goodwill and non-controlling interests may be calculated on a gross or net basis. All transaction costs are
expensed. The amendments have been applied by the Group to all business combinations with effect from 1 April 2010.
The new standards, amendments and interpretations issued and effective for the financial period commencing on 1 April 2010 which
have not had a material impact on the financial statements of the Group include:
IAS 38 (Amendment) Intangible assets
IAS 36 (Amendment) Impairment of assets
IFRS 5 (Amendment) Non-current assets held for sale and discontinued operations
IAS 27 (Revised) Consolidated and separate financial statements
IAS 39 (Amendment) Financial instruments: Recognition and measurement
As at 31 March 2011, the following new and revised standards, amendments and interpretations, which are expected to be relevant
to the Group’s results, were issued but not yet effective:
IFRS 9 Financial instruments
This standard is the first step in the process to replace IAS 39 Financial instruments: Recognition and measurement, and introduces
new requirements for classifying and measuring financial assets. The standard is applicable for annual periods beginning on or after
1 January 2013 and has not currently been endorsed by the EU. Any potential impact of this new standard will be quantified closer
to the date of adoption.
IAS 24 (Revised) Related party disclosures
The revised standard clarifies and simplifies the definition of a related party. The standard is effective for annual periods beginning
on or after 1 January 2011, and the Group will adopt the revised standard from 1 April 2011 subject to EU endorsement. No material
impact is anticipated.
Burberry Group PLC annual report 2010/11 93
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1. Basis of preparation (continued)
Basis of consolidation
The Group’s annual financial statements comprise those of the parent Company and its subsidiaries, presented as a single economic entity.
The results of the subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating
policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully
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. Intra-group transactions, balances and unrealised profits
on transactions between Group companies are eliminated in preparing the Group financial statements. The Group treats transactions with
non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference
between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.
Gains or losses on disposals to non-controlling interests are also recorded in equity.
Key sources of estimation and judgement
Preparation of the consolidated financial statements in conformity with IFRS requires that management make certain judgements,
estimates and assumptions that affect the reported revenues, expenses, assets and liabilities and the disclosure of contingent liabilities.
If in the future such estimates and assumptions, which are based on management’s best judgement at the date of the financial
statements, deviate from actual circumstances, the original estimate and assumptions will be modified as appropriate in the period
in which the circumstances change.
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. The key areas where the estimates and assumptions applied
have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are discussed below:
Impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment. The recoverable amounts of cash generating units have
been determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows expected to
arise from the continuing operation of the cash generating unit and the choice of a suitable discount rate in order to calculate the
present value. Refer to note 10 for further details of goodwill balances.
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount
may not be recoverable. When a review for impairment is conducted, the recoverable amount of an asset or a cash generating unit is
determined based on value-in-use calculations prepared on the basis of management’s assumptions and estimates. Refer to note 11
for further details of tangible fixed asset balances.
Income and deferred taxes
The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the provision for income taxes
in each territory. There are many transactions and calculations during the ordinary course of business for which the ultimate tax
determination is uncertain. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes
will be due. Where the final outcome of these matters is different from the amounts which were initially recorded, such differences will
impact the income tax and deferred tax provisions and assets in the period in which such determination is made. Refer to notes 7 and
13 for further details of income and deferred tax balances.
Put option liability over non-controlling interest
The calculation of the net present value of the put option over the non-controlling interest in the Group’s business in China requires
the application of key assumptions around the future performance of both the Group and the Group’s business in China, the Burberry
Group plc market capitalisation at the date of exercise, the risk free rate in China, and China’s future gross domestic product growth.
Refer to notes 18 and 26 for further details of the put option liability.
94
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies
The consolidated financial information of Burberry Group plc and all its subsidiaries has been prepared in accordance with IFRS.
The principal accounting policies of the Group are:
a) Revenue
Revenue, which is stated excluding Value Added Tax and other sales related taxes, is the amount receivable for goods supplied
(less returns, trade discounts and allowances) and royalties receivable.
Wholesale sales are recognised when the significant risks and rewards of ownership have transferred to the customer, with provisions
made for expected returns and allowances. Retail sales, returns and allowances are reflected at the dates of transactions with customers.
Provisions for returns on retail and wholesale sales are calculated based on historical return levels. 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) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance, has been identified as
the Board of Directors.
c) Business combinations
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Contingent payments are remeasured at fair value through the Income Statement. All transaction costs are expensed to the Income
Statement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition
over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less
than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement.
d) Share schemes
The cost of the share based incentives received by employees (including executive directors) 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 i.e. market conditions. Vesting conditions which relate to non-market
conditions are allowed for in the assumptions used for 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 is 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.
e) Operating leases
Burberry Group is both a lessor and lessee of property. Gross rental expenditure in respect of operating leases is recognised on a
straight line basis over the period of the lease. Certain rental expenses are determined on the basis of revenue achieved in specific
retail locations and are accrued for on that basis.
Amounts paid to acquire the rights to a lease (lease premiums) are capitalised in intangible assets and written off in equal annual
instalments over the life of the lease contract. Lease incentives, typically rent free periods and capital contributions, are held on the
Balance Sheet in accruals and deferred income and recognised over the term of the lease.
Rental income from operating leases is recognised on a straight line basis over the period of the lease. Lease incentives are deferred
and recognised over the term of the lease.
f) Dividend distributions
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. Interim dividends are recognised when paid.
Burberry Group PLC annual report 2010/11 95
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies (continued)
g) Pension costs
Defined benefit schemes
Eligible employees of the Group participate in defined benefit schemes in France and Taiwan.
The liability recognised in the Balance Sheet in respect of defined benefit schemes represents the Group’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
past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised directly in other
comprehensive income.
Defined contribution schemes
Eligible employees also participate in 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 employees is recognised in the Income Statement
and comprises the amount of contributions payable to the schemes in respect of the year.
h) 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 align the accounting policies of acquired
businesses with those of the Group.
Goodwill is assigned an indefinite useful economic life. Impairment reviews are performed annually, or more frequently if events or
changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses recognised on goodwill are not
reversed in future periods.
Trade marks and other intangible assets
The cost of securing and renewing trade marks and the cost of acquiring other intangible assets such as lease premiums is capitalised
and amortised by equal annual instalments over the useful economic life of the asset, typically ten years. The useful economic life
of trade marks and other intangible assets is determined on a case-by-case basis, in accordance with the terms of the underlying
agreement and the nature of the asset.
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 five years.
i) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost, based on historical revalued amounts, less accumulated depreciation
and provision to reflect any impairment in value. Cost includes the original purchase price of the asset and costs attributable to bringing
the asset to its working condition for its intended use.
Depreciation
Depreciation of property, plant and equipment 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
Freehold buildings
Leaseholds – less than 50 years expired
Plant, machinery, fixtures and fittings
Retail fixtures and fittings
Office equipment
Computer equipment
Assets in the course of construction
Not depreciated
Up to 50 years
Over the unexpired term of the lease
3 – 8 years
2 – 5 years
5 years
Up to 5 years
Not depreciated
Profit/loss on disposal of property, plant and equipment
Profits and losses on the 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.
96
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies (continued)
j) Impairment of non-financial 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).
k) Investment properties
Investment properties are freehold properties held to earn rentals and/or for capital appreciation. Investment properties are stated at
cost less accumulated depreciation and provision to reflect any impairment in value. Cost includes the original purchase price plus any
directly attributable transaction costs. Investment properties are depreciated over an estimated useful life of up to 50 years. Depreciation
is calculated on a straight-line basis over the estimated useful life of the properties.
l) Discontinued operations and assets classified as held for sale
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operations that has been disposed of, has been abandoned or meets the criteria to be classified as held for sale. Discontinued
operations are presented on the Income Statement as a separate line and are shown net of tax.
Non-current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction
rather than through continued use, and a sale within the next twelve months is considered to be highly probable. They are stated as
the lower of carrying amount and fair value less cost to sell.
m) Inventories
Inventories 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 nature and condition of inventory, as well as its anticipated saleability.
n) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income
Statement because it excludes items of income or expense which are taxable or deductible in other years and it further excludes
items which are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates which have been enacted
or substantively enacted by the balance sheet date.
Deferred tax liabilities are provided in full 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, no deferred tax will be recognised. Deferred tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised
or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised.
Deferred 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.
o) Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of past events, for which it is probable that
an outflow of economic benefit will be required to settle the obligation, and where the amount of the obligation can be reliably estimated.
When the effect of the time value of money is material, provision amounts are calculated on the present value of the expenditures
expected to be required to settle the obligation. The present value is calculated using forward market interest rates, as measured at the
balance sheet reporting date, which have been adjusted for risks reflected in future cash flow estimates.
p) Share capital
Ordinary 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 included in equity attributable to the Company’s equity holders.
Burberry Group PLC annual report 2010/11 97
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies (continued)
q) Financial instruments
A financial instrument is initially recognised at fair value 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 substantially
all risks and rewards of the asset are transferred. A financial liability is no longer recognised when the obligation specified in the contract
is discharged, cancelled or expires.
Subsequent to initial recognition, all financial liabilities are stated at amortised cost using the effective interest rate method except for
derivatives, which are classified as held for trading (except where they qualify for hedge accounting) and are held at fair value. Financial
liabilities held at amortised cost include trade payables, accruals, borrowings and put option liabilities over the non-controlling interests.
The Group classifies its investments in the following categories: financial assets at fair value through the profit or loss and loans and
receivables. Loans and receivables include trade and other receivables and cash and other equivalents. Derivatives are classified as
held for trading unless in a hedging relationship and are held at fair value.
The Group’s primary categories of financial instruments are listed below.
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits with an original maturity date of three months or less, held with
banks and liquidity funds. Bank overdrafts are recorded under current liabilities on the Balance Sheet.
Trade and other receivables
Trade and other receivables are included in current assets, except for maturities greater than twelve months after the balance sheet
date. Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
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 are included in current liabilities, except for maturities greater than twelve months after the balance sheet
date. Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings are recognised initially at fair value, inclusive of transaction costs incurred. Borrowings are subsequently stated at amortised
cost and the difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income
Statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.
Put option liabilities over non-controlling interests
Put options over shares in subsidiaries held by non-controlling interests that arise on acquisition are recognised initially at fair value
through equity. They are subsequently measured at amortised cost using the effective interest rate method. The discount is unwound
through the Income Statement as a finance charge.
98
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies (continued)
q) Financial instruments (continued)
Derivative instruments
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates arising on certain
trading transactions. The principal derivative instruments used are forward foreign exchange contracts taken out to hedge highly
probable cash flows in relation to future sales, royalty receivables and product purchases. To manage interest rate risk the Group
manages its proportion of fixed and floating rate borrowings to within limits approved by the Board using interest rate swap derivatives.
It designates foreign currency borrowings in a net investment hedge of the assets of overseas subsidiaries.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the hedging instruments that are used in hedging transactions are highly effective
in offsetting changes in fair values or cash flows of hedged items.
Derivatives are initially recognised at fair value at the trade date and are subsequently remeasured at their fair value. The method of
recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of
the item being hedged. The Group designates certain derivatives as either: (1) hedges of the fair value of recognised assets and liabilities
or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges); or (3) classified as
held for trading.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Income Statement
immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred in other
comprehensive income. The gain or loss relating to the ineffective portion of the gain or loss is recognised immediately in the Income
Statement. Amounts deferred in other comprehensive income are recycled in the Income Statement in the periods when the hedged
item affects the Income Statement. If it is expected that all or a portion of a loss deferred in other comprehensive income will not be
recovered in one or more future periods, or the hedged transaction is no longer expected to occur, the amount that is not expected
to be recovered is reclassified to the Income Statement. If a derivative instrument is not designated as a hedge, the subsequent change
to the fair value is recognised in the Income Statement within operating expenses.
Where the Group hedges net investments in foreign operations through foreign currency borrowings, the gains or losses on the
retranslation of the borrowings are recognised in other comprehensive income and will be reclassified to the Income Statement when
the foreign operation that was hedged is disposed of.
Burberry Group PLC annual report 2010/11 99
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Accounting policies (continued)
r) 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). The consolidated financial statements are presented in Sterling,
which is the Company’s functional and the Group’s presentation 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 monthly average exchange rate. Monetary assets and liabilities denominated in foreign currencies, which
are held at the year end, are translated into the functional currency at the exchange rate ruling at the balance sheet date. Exchange
differences on monetary items are recognised in 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 the Group, in which case such differences are taken directly to the
foreign currency translation reserve within equity.
Translation of the results of overseas businesses
The results of overseas subsidiaries are translated into the Group’s presentation currency of Sterling each month at the weighted
average exchange rate for the month according to the phasing of the Group’s trading results. The weighted 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 the 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.
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 principal exchange rates used were as follows:
Euro
US Dollar
Hong Kong Dollar
Korean Won
Chinese Yuan Renminbi
Average rate
Closing rate
Year to
31 March
2011
Year to
31 March
2010
Year to
31 March
2011
Year to
31 March
2010
1.18
1.56
12.11
1,786
10.51
1.14
1.60
12.55
1,917
10.46
1.13
1.61
12.49
1,763
10.52
1.12
1.52
11.79
1,718
10.37
The average exchange rate achieved by the Group on its Yen royalty income, taking into account its use of Yen forward foreign
exchange contracts on a monthly basis approximately twelve months in advance of royalty receipts, was Yen 143.7: £1 in the year
to 31 March 2011 (2010: Yen 154.0: £1).
s) Adjusted profit before taxation and exceptional items
Exceptional items are those items that are largely one-off and material in nature, as well as the unwind of the discount and any fair
value movements on put option liabilities. These items are added back/deducted from profit/loss before taxation to arrive at adjusted
profit/loss before taxation which is disclosed in order to provide a clear and consistent presentation of the underlying performance of
the Group’s ongoing business.
100
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Segmental analysis
The Chief Operating Decision Maker has been identified as the Board of Directors. The Board reviews the Group’s internal reporting
in order to assess performance and allocate resources. Management has determined the operating segments based on the reports
used by the Board.
The Board considers Burberry’s business through its two channels to market, being Retail/Wholesale and Licensing. Retail/Wholesale
revenues are generated by the sale of luxury goods through Burberry mainline stores, concessions, outlets and digital commerce as
well as Burberry franchisees, prestige department stores globally and multi-brand specialty accounts.
The flow of global product between Retail and Wholesale channels and across our regions is monitored and optimised at a corporate level
and implemented via the Group’s inventory hubs situated in Asia, Europe and the US. Licensing revenues are generated through the receipt
of royalties from Burberry’s partners in Japan and global licensees of fragrances, eyewear, timepieces and European childrenswear.
The Board assesses channel performance based on a measure of adjusted operating profit. This measurement basis excludes the
effects of non-recurring events and exceptional items. The measure of earnings for each operating segment that is reviewed by the
Board includes an allocation of corporate and central costs. Interest income and charges are not included in the result for each
operating segment that is reviewed by the Board.
Retail/Wholesale
Licensing
Total
Total segment revenue
Inter-segment revenue(2)
Revenue from external customers
Depreciation and amortisation
Net impairment charges
Other non-cash expenses
– Share based payments
Adjusted operating profit
Interest receivable and similar income
Interest payable and similar charges
Exceptional items(3)
Profit before taxation
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
1,402.9
1,087.6
–
–
1,402.9
1,087.6
58.1
–
22.6
219.5
47.6
6.1
13.6
137.7
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
116.5
(18.1)
98.4
–
–
5.7
81.6
112.2
1,519.4
1,199.8
(14.7)
97.5
(18.1)
(14.7)
1,501.3
1,185.1
–
–
4.5
82.2
58.1
–
28.3
301.1
1.9
(5.1)
(2.2)
47.6
6.1
18.1
219.9
1.1
(6.2)
(3.4)
295.7
211.4
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
(2) Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.
(3) Refer to note 5 for details of exceptional items.
Retail/Wholesale
Licensing
Total
Additions to non-current assets
Total segment assets
Goodwill
Cash and cash equivalents
Taxation
Assets held for sale
Total assets per Balance Sheet
Year to
31 March
2011
£m
123.1
Year to
31 March
2010
£m
73.2
728.6
589.1
Year to
31 March
2011
£m
Year to
31 March
2010
£m
Year to
31 March
2011
£m
–
4.2
–
123.1
7.3
732.8
73.1
466.3
78.7
13.5
Year to
31 March
2010
£m
73.2
596.4
34.9
468.4
39.9
–
1,364.4
1,139.6
Burberry Group PLC annual report 2010/11 101
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Segmental analysis (continued)
Revenue by product
Womenswear
Menswear
Non-apparel
Childrenswear/Other
Retail/Wholesale
Licensing
Total
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Revenue by destination
Europe
Americas
Asia Pacific
Rest of World
Retail/Wholesale
Licensing
Total
Year to
31 March
2011
£m
456.6
325.9
563.3
57.1
Year to
31 March
2010(1)
£m
373.4
249.4
416.6
48.2
1,402.9
1,087.6
98.4
97.5
1,501.3
1,185.1
Year to
31 March
2011
£m
474.6
386.5
457.1
84.7
Year to
31 March
2010(1)
£m
421.8
324.7
282.7
58.4
1,402.9
1,087.6
98.4
97.5
1,501.3
1,185.1
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Revenue to external customers originating in the UK totalled £402.9m for the year to 31 March 2011 (2010: £350.0m).
Revenue to external customers originating in foreign countries totalled £1,098.4m for the year to 31 March 2011 (2010: £835.1m).
This amount includes £357.6m of external revenues originating in the US (2010: £307.6m).
The total of non-current assets other than financial instruments and deferred tax assets located in the UK is £90.2m (2010: £64.6m).
The remaining £324.5m of non-current assets are located in other countries (2010: £267.1m), with £141.3m located in the US
(2010: £145.5m) and £57.6m located in China (2010: £nil).
4. Net operating expenses
Selling and distribution costs
Administrative expenses
Loss on disposal of property, plant and equipment
Property rental income under operating leases
Exceptional items
Restructuring costs relating to continuing operations
Total
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Note
Year to
31 March
2011
£m
333.5
374.8
1.1
(0.8)
Year to
31 March
2010(1)
£m
286.5
250.9
4.0
(0.1)
5
(1.0)
707.6
3.4
544.7
102
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Depreciation of property, plant and equipment
– within cost of sales
– within distribution costs
– within administrative expenses
Amortisation of intangible assets (included within administrative expenses)
Loss on disposal of property, plant and equipment and intangible assets
Goodwill impairment charge
Net impairment charge relating to certain retail assets
Employee costs
Operating lease rentals
– minimum lease payments
– contingent rents
Net exchange gain included in the Income Statement
Trade receivables net impairment charge
Exceptional items
Restructuring costs relating to continuing operations
Put option liability finance charges
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
0.3
7.6
41.3
8.9
1.1
–
–
0.7
5.5
35.2
6.2
4.0
1.4
4.7
298.9
221.2
88.5
51.7
(1.0)
1.3
(1.0)
3.2
71.1
33.0
(4.1)
2.8
3.4
–
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Exceptional operating items
The year to 31 March 2011 includes an exceptional credit for the release of £1.0m of the restructuring provision held in respect of
the cost efficiency programme announced in the year to 31 March 2009. The year to 31 March 2010 included £3.4m of exceptional
charges in respect of this programme.
Exceptional financing charges
The exceptional financing charge for the year ended 31 March 2011 relates to the unwinding of the discount on the put option liability
over the non-controlling interest in Burberry (Shanghai) Trading Co., Ltd. Refer to note 18 for further details of the carrying value of the
put option liability.
Auditor remuneration
Refer to note 31 for details of fees incurred during the year in relation to audit and non-audit services, for both the continuing and
discontinued operations.
Burberry Group PLC annual report 2010/11 103
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6. Net finance charge
Bank interest income
Interest receivable and similar income
Interest expense on bank loans and overdrafts
Loss on interest rate swap transferred from equity
Other interest expense
Interest payable and similar charges
Other financing charges – put option liability
Net finance charge
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
7. Taxation
Analysis of charge for the year recognised in the Group Income Statement:
Current tax
UK corporation tax
Current tax on income for the year to 31 March 2011 at 28% (2010: 28%)
Double taxation relief
Adjustments in respect of prior years
Foreign tax
Current tax on income for the year
Adjustments in respect of prior years
Total current tax
Deferred tax
UK deferred tax
Origination and reversal of temporary differences
Impact of changes to tax rates
Adjustments in respect of prior years
Foreign deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior years
Total deferred tax
Total tax charge on profit
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
1.9
1.9
(5.1)
–
–
(5.1)
(3.2)
(6.4)
1.1
1.1
(4.5)
(1.4)
(0.3)
(6.2)
–
(5.1)
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
69.5
(2.2)
(5.2)
62.1
39.7
0.2
102.0
(4.8)
1.0
(1.7)
(5.5)
(11.0)
(2.3)
(18.8)
83.2
52.2
(2.4)
(7.1)
42.7
23.1
5.2
71.0
(0.7)
–
2.7
2.0
(12.9)
(1.3)
(12.2)
58.8
104
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7. Taxation (continued)
Analysis of charge for the year recognised in equity:
Current tax
Current tax credit on share options (retained earnings)
Current tax credit on exchange differences on loans (foreign currency translation reserve)
Total current tax recognised in equity
Deferred tax
Deferred tax charge on cash flow hedges deferred in equity (hedging reserve)
Deferred tax (credit)/charge on cash flow hedges transferred to income (hedging reserve)
Deferred tax credit on share options (retained earnings)
Deferred tax (credit)/charge on exchange differences on loans (foreign currency translation reserve)
Total deferred tax recognised in equity
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
(2.1)
(0.9)
(3.0)
2.2
(0.8)
(13.1)
(1.1)
(12.8)
(2.2)
–
(2.2)
0.1
4.9
(7.1)
6.6
4.5
The tax rate applicable on profit varied from the standard rate of corporation tax in the UK due to the following factors:
Tax at 28% (2010: 28%) on profit before taxation
Rate adjustments relating to overseas profits
Permanent differences
Current year tax losses not recognised
Adjustments in respect of prior years
Adjustments to deferred tax relating to changes in tax rates
Total taxation charge
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Total taxation recognised in the Group Income Statement arises on:
Adjusted profit before taxation
Exceptional items
Total taxation charge
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
82.8
(8.0)
11.8
4.6
(9.0)
1.0
83.2
59.2
(8.3)
6.5
1.9
(0.5)
–
58.8
Year to
31 March
2011
£m
83.0
0.2
83.2
Year to
31 March
2010(1)
£m
58.8
–
58.8
Burberry Group PLC annual report 2010/11 105
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8. Earnings per share
The calculation of basic earnings per share is based on attributable profit or loss for the year divided by the weighted average number of
ordinary shares in issue during the year. Basic and diluted earnings per share based on adjusted profit before taxation are also disclosed
to indicate the underlying profitability of the Group.
Attributable profit for the year before exceptional items(2) and discontinued operations
Effect of exceptional items(2) (after taxation)
Attributable profit for the year from continuing operations
Attributable loss from discontinued operations(3)
Attributable profit for the year
(1) March 2010 has been re-presented to exclude the results of the discontinued Spanish operations.
(2) Refer to note 5 for details of exceptional items.
(3) Refer to note 29 for details of basic and diluted earnings per share from discontinued operations.
Year to
31 March
2011
£m
Year to
31 March
2010(1)
£m
217.0
(2.4)
214.6
(6.2)
208.4
155.2
(3.4)
151.8
(70.4)
81.4
The weighted average number of ordinary shares represents the weighted average number of Burberry Group plc ordinary shares
in issue throughout the year, excluding ordinary shares held in the Group’s employee share option plan trusts (ESOP trusts).
Diluted earnings per share is based on the weighted average number of ordinary shares in issue during the year. In addition, account
is taken of any options and awards made under the employee share incentive schemes, which will have a dilutive effect when exercised.
Weighted average number of ordinary shares in issue during the year
Dilutive effect of the employee share incentive schemes
Diluted weighted average number of ordinary shares in issue during the year
9. Dividends paid to owners of the Company
Prior year final dividend paid 10.50p per share (2010: 8.65p)
Interim dividend paid 5.00p per share (2010: 3.50p)
Total
Year to
31 March
2011
Millions
435.0
9.0
444.0
Year to
31 March
2011
£m
45.7
21.7
67.4
Year to
31 March
2010
Millions
432.6
9.3
441.9
Year to
31 March
2010
£m
37.4
15.1
52.5
A final dividend in respect of the year to 31 March 2011 of 15.00p (2010: 10.50p) per share, amounting to £65.4m (2010: £45.7m),
has been proposed for approval by the shareholders at the Annual General Meeting subsequent to the balance sheet date. The final
dividend to Burberry Group plc shareholders has not been recognised as a liability at the year end and will be paid on 4 August 2011
to shareholders on the register at the close of business on 8 July 2011.
106
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. Intangible assets
Cost
As at 1 April 2009
Effect of foreign exchange rate changes
Additions
Business combination
Disposals
Impairment charge
Reclassification from assets under construction (note 11)
As at 31 March 2010
Effect of foreign exchange rate changes
Additions
Business combination (note 28)
Disposals
As at 31 March 2011
Accumulated amortisation
As at 1 April 2009
Effect of foreign exchange rate changes
Charge for the year
Disposals
As at 31 March 2010
Effect of foreign exchange rate changes
Charge for the year
Disposals
As at 31 March 2011
Net book value
As at 31 March 2011
As at 31 March 2010
Impairment testing of goodwill
The carrying value of the goodwill allocated to cash generating units:
China
Korea
Other
Total
Trade marks
and other
intangible assets
£m
Goodwill
£m
Computer
software
£m
33.1
2.6
–
0.6
–
(1.4)
–
34.9
(1.9)
–
40.1
–
73.1
–
–
–
–
–
–
–
–
–
73.1
34.9
18.1
(0.6)
0.2
–
(0.6)
–
–
17.1
0.1
6.6
–
–
23.8
8.0
(0.3)
1.4
(0.1)
9.0
0.1
1.9
–
11.0
12.8
8.1
26.8
0.1
7.2
–
(1.1)
–
5.2
38.2
(0.4)
14.4
–
(0.4)
51.8
12.5
–
4.8
(0.7)
16.6
(0.2)
7.0
(0.4)
23.0
28.8
21.6
Total
£m
78.0
2.1
7.4
0.6
(1.7)
(1.4)
5.2
90.2
(2.2)
21.0
40.1
(0.4)
148.7
20.5
(0.3)
6.2
(0.8)
25.6
(0.1)
8.9
(0.4)
34.0
114.7
64.6
As at
31 March
2011
£m
38.9
23.4
10.8
73.1
As at
31 March
2010
£m
–
23.6
11.3
34.9
No impairment has been recognised in respect of the carrying value of the goodwill balance as the recoverable amount of goodwill
for each cash generating unit exceeds its carrying value. The recoverable amount of all cash generating units have been determined on
a value-in-use basis. The value-in-use calculations were performed using pre-tax cash flow projections for 2011/12 based on financial
plans approved by management. The value-in-use calculations comprise three years of discounted cash flows and a discounted
terminal value at the end of the third year. No growth has been assumed for the China and Korea cash flows beyond the year ending
31 March 2012 and the cash flows have been discounted at pre-tax rates reflecting the Group’s weighted average cost of capital
adjusted for country specific tax rates and risks. The adjusted weighted average cost of capital rates for China and Korea were 13.5%
and 14.1% respectively (2010: n/a, 16.3%).
At 31 March 2010, an impairment of £1.4m was recognised in respect of the carrying value of goodwill in the Guam business.
Burberry Group PLC annual report 2010/11 107
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. Property, plant and equipment
Cost
As at 1 April 2009
Effect of foreign exchange rate changes
Additions
Disposals
Reclassification from assets under construction
Business combination
As at 31 March 2010
Effect of foreign exchange rate changes
Additions
Disposals
Reclassification from assets under construction
Transfers to investment properties (note 12)
Business combination (note 28)
Transfers to assets held for sale (note 29)
As at 31 March 2011
Accumulated depreciation and impairment
As at 1 April 2009
Effect of foreign exchange rate changes
Charge for the year
Net impairment charge on assets
Disposals
As at 31 March 2010
Effect of foreign exchange rate changes
Charge for the year
Disposals
Transfers to investment properties (note 12)
Transfers to assets held for sale (note 29)
As at 31 March 2011
Net book value
As at 31 March 2011
As at 31 March 2010
Freehold land
and buildings
£m
Leasehold
improvements
£m
Fixtures,
fittings and
equipment
£m
Assets in the
course of
construction
£m
97.1
(4.5)
–
(0.4)
–
–
92.2
(3.7)
–
–
–
(3.8)
–
(29.6)
55.1
32.2
(1.4)
2.4
–
(0.1)
33.1
(1.3)
1.9
–
(0.7)
(16.7)
16.3
38.8
59.1
160.9
(6.1)
17.3
(7.7)
4.8
–
169.2
(6.5)
18.7
(0.3)
4.3
–
–
–
204.4
(2.8)
38.6
(23.2)
8.4
0.8
226.2
(4.4)
62.2
(23.9)
6.6
–
6.3
(6.6)
20.1
(0.6)
9.9
(1.4)
(18.4)
–
9.6
–
21.4
(0.2)
(10.9)
–
–
–
185.4
266.4
19.9
53.4
(1.9)
14.8
2.3
(6.1)
62.5
(2.1)
19.6
(0.3)
–
–
79.7
105.7
106.7
138.3
(2.5)
28.9
4.0
(23.2)
145.5
(3.1)
32.1
(23.0)
–
(2.5)
149.0
117.4
80.7
–
–
–
–
–
–
–
–
–
–
–
–
19.9
9.6
Total
£m
482.5
(14.0)
65.8
(32.7)
(5.2)
0.8
497.2
(14.6)
102.3
(24.4)
–
(3.8)
6.3
(36.2)
526.8
223.9
(5.8)
46.1
6.3
(29.4)
241.1
(6.5)
53.6
(23.3)
(0.7)
(19.2)
245.0
281.8
256.1
During the year to 31 March 2011, a net impairment charge of £nil (2010: £6.3m) was identified as part of the annual impairment review
relating to both the continuing and discontinued operations.
Where indicators of impairment were identified, the impairment review compared the value-in-use of the assets to the carrying values
at 31 March 2011. The pre-tax cash flow projections were based on financial plans approved by management and extrapolated beyond
the budget year to the lease exit dates using growth rates and inflation rates appropriate to each country’s economic conditions.
The pre-tax discount rates used in these calculations were between 12.2% and 18.5% (2010: between 11.6% and 17.3%), based
on the Group’s weighted average cost of capital adjusted for country-specific tax rates and risks.
108
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. Investment properties
Cost
As at 1 April
Transfers from property, plant and equipment
As at 31 March
Accumulated depreciation
As at 1 April
Transfers from property, plant and equipment
Charge for the year
As at 31 March
Net book value
2011
£m
–
3.8
3.8
–
0.7
0.1
0.8
3.0
2010
£m
–
–
–
–
–
–
–
–
During the year ended 31 March 2011, a freehold property in France was leased out to a third party on commercial terms. Rental income
net of operating expenses directly attributable to the property of £0.7m is included in the profit for the year ended 31 March 2011.
Based on a valuation report prepared by Cushman & Wakefield, the market valuation of the investment property is £11.8m, using
closing exchange rates at 31 March 2011. The valuation was prepared in accordance with the Royal Institution of Chartered Surveyors
and the International Valuation Standards Council, and is supported by market evidence.
13. Deferred taxation
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and there is an intention to settle on a net basis, and to the same fiscal authority. The offset amounts are shown in the
table below:
Deferred tax assets
Deferred tax liabilities
Net amount
The movement in the deferred tax account is as follows:
As at 1 April
Effect of foreign exchange rate changes
Credited/(charged) to the Income Statement
Credited/(charged) to equity
As at 31 March
As at
31 March
2011
£m
70.4
(1.8)
68.6
As at
31 March
2011
£m
37.6
(0.6)
18.8
12.8
68.6
As at
31 March
2010
£m
39.2
(1.6)
37.6
As at
31 March
2010
£m
55.4
(0.5)
(12.8)
(4.5)
37.6
Burberry Group PLC annual report 2010/11 109
Other
£m
9.7
0.3
(10.9)
(0.9)
–
2.4
–
1.5
Total
£m
25.3
(1.0)
(18.2)
6.1
(0.2)
2.2
(0.1)
8.0
Other
£m
16.8
(1.5)
Total
£m
80.7
(1.5)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. Deferred taxation (continued)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the off-setting of balances within
the same tax jurisdiction, is as follows:
Deferred tax liabilities
Unrealised
inventory
profit and
other
inventory
provisions
£m
Accelerated
capital
allowances
£m
Derivative
instruments
£m
Unused tax
losses
£m
24.6
(1.7)
(7.1)
15.8
(0.4)
(9.6)
–
5.8
(6.1)
0.2
1.5
(4.4)
0.1
3.5
–
(0.8)
0.1
–
(0.1)
–
–
1.6
(0.1)
1.5
(3.0)
0.2
(1.6)
(4.4)
0.1
4.3
–
–
As at 1 April 2009
Effect of foreign exchange rate changes
(Credited)/charged to the Income Statement –
continuing operations
As at 31 March 2010
Effect of foreign exchange rate changes
(Credited)/charged to the Income Statement –
continuing operations
Credited to equity
As at 31 March 2011
Deferred tax assets
Unrealised
inventory
profit and
other
inventory
provisions
£m
Accelerated
capital
allowances
£m
2.0
(0.1)
5.3
(2.1)
–
5.1
0.2
(12.9)
–
(7.6)
30.6
(0.5)
(6.3)
(7.0)
–
16.8
(0.7)
13.0
–
29.1
As at 1 April 2009
Effect of foreign exchange rate changes
Credited/(charged) to the Income
Statement – continuing operations
Credited/(charged) to the Income
Statement – discontinued operations
Credited/(charged) to equity
As at 31 March 2010
Effect of foreign exchange rate changes
(Charged)/credited to the Income
Statement – continuing operations
Credited/(charged) to equity
As at 31 March 2011
Share
schemes
£m
Derivative
instruments
£m
Unused tax
losses
£m
21.5
0.6
4.1
–
0.6
–
7.1
11.8
–
5.6
13.1
30.5
5.7
–
–
–
(5.0)
0.7
–
1.4
(1.5)
0.6
(4.1)
(1.5)
(6.0)
(11.1)
–
6.9
(1.0)
10.7
–
16.6
(4.8)
(6.6)
2.4
0.7
3.2
1.1
7.4
(25.0)
(4.5)
43.7
(0.8)
21.0
12.7
76.6
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related benefit through the
future taxable profits is probable. The Group did not recognise deferred tax assets of £15.2m (2010: £45.7m) in respect of losses and
temporary timing differences amounting to £45.1m (2010: £151.1m) that can be set off against future taxable income. There is a time
limit for the recovery of £9.0m of these potential assets (2010: £41.3m) which ranges from nine to ten years (2010: five to fifteen years).
Included within other temporary differences above is a deferred tax liability of £0.6m (2010: £0.8m) relating to unremitted overseas
earnings. No deferred tax liability is provided in respect of any future remittance of earnings of foreign subsidiaries where the Group
is able to control the remittance of earnings and it is probable that such earnings will not be remitted in the foreseeable future, or
where no liability would arise on the remittance. The unrecognised deferred tax liability on unremitted earnings is £1.0m (2010: £nil).
110
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. Trade and other receivables
Non-current
Deposits and prepayments
Total non-current trade and other receivables
Current
Trade receivables
Provision for doubtful debts
Net trade receivables
Other receivables
Prepayments and accrued income
Total current trade and other receivables
Total trade and other receivables
As at
31 March
2011
£m
As at
31 March
2010
£m
15.2
15.2
100.7
(12.1)
88.6
22.3
21.6
132.5
147.7
11.0
11.0
109.1
(16.8)
92.3
15.3
20.8
128.4
139.4
£10.4m of the non-current deposits and prepayments balance (2010: £6.8m) is due within five years from the balance sheet date, with
the remainder due at various stages after this. The entire balance is non-interest bearing.
The individually impaired receivables relate to balances with trading parties which have passed their payment due dates or where
uncertainty exists over recoverability. As at 31 March 2011, trade receivables of £18.4m (2010: £24.0m) were impaired. The amount
of the provision against these receivables was £12.1m as of 31 March 2011 (2010: £16.8m). It was assessed that a portion of the
receivables is expected to be recovered. Individually impaired receivables of £3.7m (2010: £6.8m) relate to the discontinued Spanish
operations. The ageing of the impaired receivables is as follows:
Current
Less than one month overdue
One to three months overdue
Over three months overdue
As at
31 March
2011
£m
As at
31 March
2010
£m
3.2
7.0
3.1
5.1
18.4
8.3
6.1
3.5
6.1
24.0
As at 31 March 2011, trade receivables of £5.3m (2010: £3.8m) were overdue but not impaired. The ageing of these overdue
receivables is as follows:
Less than one month overdue
One to three months overdue
Over three months overdue
Movement on the provision for doubtful debts is as follows:
As at 1 April
Increase in provision for doubtful debts
Receivables written off during the year as uncollectable
Unused provision reversed
As at 31 March
As at
31 March
2011
£m
As at
31 March
2010
£m
4.6
0.6
0.1
5.3
3.5
0.3
–
3.8
Year to
31 March
2011
£m
Year to
31 March
2010
£m
16.8
5.6
(0.8)
(9.5)
12.1
7.6
11.3
(0.4)
(1.7)
16.8
In the year to 31 March 2011, the Group reversed £5.2m of doubtful debts provision in relation to trade debtors previously provided for
in the discontinued Spanish operations.
Burberry Group PLC annual report 2010/11
111
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. Trade and other receivables (continued)
There are no impaired receivables within other receivables (2010: £0.1m). The maximum exposure to credit risk at the reporting date
with respect to trade receivables is the carrying amount on the Balance Sheet. The Group does not hold any collateral as security.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
US Dollar
Euro
Chinese Yuan Renminbi
Other currencies
Year to
31 March
2011
£m
Year to
31 March
2010
£m
59.0
22.9
12.1
23.5
30.2
147.7
56.2
23.8
27.3
–
32.1
139.4
The nominal value less impairment provision of trade and other receivables is assumed to approximate its fair value because of the short
maturity of these instruments.
15. Inventories
Raw materials
Work in progress
Finished goods
Total inventories
As at
31 March
2011
£m
5.1
0.6
242.2
247.9
As at
31 March
2010
£m
7.1
2.7
157.1
166.9
The cost of inventories recognised as an expense and included in cost of sales for the continuing and discontinued operations
amounted to £500.0m (2010: £460.7m).
In the year to 31 March 2011, the Group reversed £4.6m of previous inventory writedowns in relation to the stock held in the
discontinued Spanish operations. The cost of inventories physically destroyed in the year is £6.6m (2010: £1.5m).
16. Derivative financial instruments
The Group Income Statement is affected by transactions denominated in foreign currencies. To reduce exposure to currency
fluctuations, the Group has a policy of hedging foreign currency denominated transactions by entering into forward foreign exchange
contracts. These transactions are recorded as cash flow hedges.
Cash flow hedges
The Group’s foreign currency denominated transactions arise principally from royalty income, sales and purchases. The Group manages
these exposures through the use of forward foreign exchange contracts.
Derivative financial assets
Forward foreign exchange contracts – cash flow hedges
Forward foreign exchange contracts – held for trading
Equity swap contracts – held for trading
Total position
Comprising:
Total non-current position
Total current position
Total cash flow hedge gains of £1.6m (2010: £1.7m) are expected to be recognised within twelve months.
As at
31 March
2011
£m
As at
31 March
2010
£m
1.6
–
9.2
10.8
9.2
1.6
1.7
0.1
2.5
4.3
1.7
2.6
112
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Derivative financial instruments (continued)
Derivative financial liabilities
Forward foreign exchange contracts – cash flow hedges
Total position
Comprising:
Total non-current position
Total current position
As at
31 March
2011
£m
As at
31 March
2010
£m
(3.9)
(3.9)
–
(3.9)
(9.2)
(9.2)
(0.2)
(9.0)
Total cash flow hedge losses of £3.9m (2010: £9.0m) are expected to be recognised within twelve months.
The current portion of the financial instruments matures at various dates within one month to one year from the balance sheet date.
Net derivative financial instruments
– book value
– fair value
As at
31 March
2011
£m
6.9
6.9
As at
31 March
2010
£m
(4.9)
(4.9)
The fair value of equity swap contracts and forward foreign exchange contracts is based on a comparison of the contractual and market
rates after discounting using the appropriate yield curves as at 31 March each year. All fair value measurements are calculated using
inputs which are based on observable market data (Level 2).
Additional information
Notional principal amounts of the outstanding forward foreign exchange contracts
Notional principal amounts of the outstanding equity swap contracts
Ineffective portion of cash flow hedges released from equity to the Income Statement during the year
Movement on derivatives held for trading for the year recognised within net operating expenses
in the Income Statement
Movement on interest rate swaps recognised within net finance charge in the
Income Statement (note 6)
As at
31 March
2011
£m
197.3
10.8
0.5
5.5
–
As at
31 March
2010
£m
313.5
3.5
0.1
5.6
(1.4)
During the year, £0.5m (2010: £0.1m) of cash flow hedges were considered to be ineffective and were recognised immediately in the
Income Statement within net operating expenses. This arose from changes to ‘highly probable’ forecast transactions during the year.
Burberry Group PLC annual report 2010/11 113
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Total
As at
31 March
2011
£m
235.1
231.2
466.3
As at
31 March
2010
£m
267.1
201.3
468.4
The fair value of short-term deposits approximates the carrying amount because of the short maturity of the instruments.
18. Trade and other payables
Non-current
Deferred consideration
Put option liability over non-controlling interest
Other creditors, accruals and deferred income
Total non-current trade and other payables
Current
Trade creditors
Other taxes and social security costs
Deferred consideration
Other creditors
Accruals and deferred income
Total current trade and other payables
Total trade and other payables
As at
31 March
2011
£m
As at
31 March
2010
£m
1.9
47.3
35.2
84.4
85.8
16.7
12.5
20.5
147.9
283.4
367.8
–
–
26.5
26.5
62.1
6.2
–
17.7
114.2
200.2
226.7
Following the acquisition of the Burberry retail and distribution business in China, Sparkle Roll Holdings Limited, a non-Group company,
retains a 15% economic interest in the Group’s business in China. Put and call options exist over this interest stake which are
exercisable after 5 years from acquisition date in the case of the call option, and 10 years from acquisition date in the case of the put
option. The net present value of the put option has been recognised as a non-current financial liability under IAS 39.
The key assumptions in arriving at the value of the put option are the future performance of the Group and that of the Group’s business
in China, the Burberry Group plc market capitalisation at the date of exercise, the risk free rate in China and China’s future gross
domestic product growth.
The maturity of the other non-current creditors, accruals and deferred income, all of which do not bear interest, is as follows:
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
Total
The fair value of trade and other payables approximate their carrying amounts and are unsecured.
As at
31 March
2011
£m
As at
31 March
2010
£m
2.3
2.3
2.5
2.7
25.4
35.2
3.7
2.4
2.2
3.7
14.5
26.5
114
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. Retirement benefit obligations
The Group provides post-retirement arrangements for its employees in the UK and its overseas operations, which are either defined
benefit or defined contribution in nature. Where arrangements are funded, assets are held in independently administered trusts.
The balance sheet obligations in respect of the Group’s post-retirement arrangements, assessed in accordance with IAS 19, were:
Defined benefit schemes
Retirement Indemnities France
Burberry (Taiwan) Co Ltd retirement scheme
Total obligation
As at
31 March
2011
£m
0.3
0.3
0.6
As at
31 March
2010
£m
0.2
0.3
0.5
Costs charged to the Group Income Statement in relation to defined benefit schemes during the year to 31 March 2011 were £nil
(2010: £nil).
The pension costs charged to the Group Income Statement in relation to defined contribution schemes during the year to 31 March
2011 were £7.7m (2010: £5.3m).
Defined benefit schemes
Retirement Indemnities France
Burberry France SASU offers lump sum benefits at retirement to all employees that are employed by the Company based on the length
of service and salary. There are no assets held by Group companies in relation to this commitment.
Burberry (Taiwan) Co Ltd retirement scheme
Burberry (Taiwan) Co Ltd offers lump sum benefits at retirement to employees transferred from one of the previous operators based
on the length of service up to date of transfer (1 August 2005) and salary at retirement. There are no assets held by Group companies
in relation to this commitment. From 1 August 2005, all employees of the Company joined the defined contribution scheme operated
under local labour ordinance.
Defined contribution schemes
The Group participates in a number of defined contribution schemes. The details of the main plans are:
Burberry stakeholder plan UK
This plan was introduced on 1 April 2006 when the Experian (formerly GUS) money purchase pension plan UK closed for Burberry
employees. All UK employees are eligible to participate in this scheme. The assets of this scheme are held separately in an
independently administered fund.
Burberry money purchase plan US
The Group administers a money purchase plan in the US (a 401(k) scheme), which covers all eligible full-time employees who have
reached the age of 21 and have completed one full year of service. The assets of the scheme are held separately from those of the
Group in an independently administered fund.
Burberry Asia Limited retirement scheme
The Group administers a money purchase plan in Hong Kong, which covers all eligible full-time employees. The assets of the scheme
are held separately from those of the Group in an independently administered fund.
Burberry Group PLC annual report 2010/11 115
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. Provisions for other liabilities and charges
Balance as at 1 April 2009
Effect of foreign exchange rate changes
Created during the year
Utilised during the year
Released during the year
Balance as at 31 March 2010
Effect of foreign exchange rate changes
Created during the year
Utilised during the year
Released during the year
Balance as at 31 March 2011
Analysis of total provisions:
Non-current
Current
Total
Property
obligations
£m
13.9
0.1
2.2
(4.0)
(2.5)
9.7
(0.1)
5.0
(3.1)
–
11.5
Restructuring
costs
£m
Other
costs
£m
27.5
(1.2)
36.9
(28.7)
(4.3)
30.2
(0.5)
7.0
(20.3)
(2.8)
13.6
–
–
–
–
–
–
–
3.1
–
–
3.1
Total
£m
41.4
(1.1)
39.1
(32.7)
(6.8)
39.9
(0.6)
15.1
(23.4)
(2.8)
28.2
As at
31 March
2011
£m
As at
31 March
2010
£m
9.6
18.6
28.2
5.5
34.4
39.9
The non-current provisions relate to provisions for onerous leases and property reinstatement costs which are expected to be utilised
within nine years. Onerous leases of £0.5m (2010: £1.2m) are included within restructuring costs of which £0.2m (2010: £0.6m) are
non-current. The remaining restructuring provision of £13.4m (2010: £29.6m) represents a current liability. The majority of this relates
to the closure of the Spanish operations.
21. Bank overdrafts and borrowings
Unsecured:
Bank overdrafts
Bank borrowings
Other borrowings
Total
As at
31 March
2011
£m
As at
31 March
2010
£m
167.1
0.8
0.5
168.4
205.2
0.7
0.5
206.4
Included within bank overdrafts is £166.1m (2010: £205.0m) representing balances on cash pooling arrangements in the Group.
On 28 March 2011, a £300m multi-currency revolving credit facility was agreed with a syndicate of third party banks. At 31 March 2011,
there were no outstanding drawings (2010: £nil). Interest is charged on this facility at LIBOR plus 0.90% on drawings less than £100m,
at LIBOR plus 1.05% on drawings between £100m and £200m and at LIBOR plus 1.20% on drawings over £200m. The facility matures
on 30 June 2016. This facility replaces the £200m three year multi-currency revolving facility in place as at 16 March 2009 which had
been due to mature on 30 June 2012, and the two bilateral multi-currency revolving credit facilities, totalling £60m which had been due
to mature on 13 June 2011.
On 1 October 2010, a Yen 145m bilateral facility was agreed with a third party bank. At 31 March 2011, the amount drawn down
was Yen 100.8m (2010: Yen 100.8m). Interest is charged on this facility at the Japanese short-term prime rate plus 0.5%. The facility
matures on 1 October 2011. The undrawn facility at 31 March 2011 was Yen 44.2m.
Other borrowings relate to a loan provided by a minority interest partner totalling £0.5m due to mature on 8 November 2011. Interest
is charged on this loan at the Japanese short-term prime rate plus 0.5%.
The fair value of borrowings and overdrafts approximates the carrying amount because of the short maturity of these instruments.
116
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. Share capital and reserves
Allotted, called up and fully paid share capital
Ordinary shares of 0.05p (2010: 0.05p) each
As at 1 April 2010
Allotted on exercise of options during the year
As at 31 March 2011
Number
435,024,782
786,956
435,811,738
£m
0.2
–
0.2
At 31 March 2011, 77,215 of the 0.05p ordinary shares in issue are held as treasury shares (2010: 77,215). As permitted by the
Companies Act 2006 the Company no longer has an authorised share capital having adopted new Articles of Association at the
Annual General Meeting in 2010.
The Company has a general authority from shareholders, renewed at each Annual General Meeting, to repurchase a maximum
of 10% of its issued share capital. During the year to 31 March 2011, no ordinary shares were repurchased by the Company under
this authority.
The cost of own shares held by the Group has been offset against the profit and loss account, as the amounts paid reduce the profits
available for distribution by the Company. As at 31 March 2011 the amounts offset against this reserve are £2.8m (2010: £2.0m).
In the year to 31 March 2011 the Burberry Group plc ESOP trust has waived its entitlement to dividends of £nil (2010: £0.2m).
During the year profits of £1.7m (2010: £nil) have been transferred to capital reserves due to statutory requirements of subsidiaries.
The capital reserve consists of non-distributable reserves and the capital redemption reserve arising on the purchase of own shares.
Balance as at 1 April 2009
Other comprehensive income:
Cash flow hedges – gains deferred in equity
Cash flow hedges – losses transferred to income
Foreign currency translation differences
Tax on other comprehensive income
Total comprehensive income/(expense) for the year
Balance as at 31 March 2010
Other comprehensive income:
Cash flow hedges – losses deferred in equity
Cash flow hedges – losses transferred to income
Foreign currency translation differences
Tax on other comprehensive income/(expense)
Total comprehensive income/(expense) for the year
Transfer between reserves
Balance as at 31 March 2011
Other reserves
Hedging reserve
£m
Foreign currency
translation
reserve
£m
Capital reserve
£m
(13.4)
150.2
27.2
0.4
16.9
–
(5.0)
12.3
(1.1)
(2.6)
7.5
–
(1.4)
3.5
–
2.4
–
–
(7.3)
(6.6)
(13.9)
136.3
–
–
(15.1)
2.0
(13.1)
–
123.2
–
–
–
–
–
27.2
–
–
–
–
–
1.7
28.9
Total
£m
164.0
0.4
16.9
(7.3)
(11.6)
(1.6)
162.4
(2.6)
7.5
(15.1)
0.6
(9.6)
1.7
154.5
Burberry Group PLC annual report 2010/11 117
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23. Financial commitments
The Group has commitments relating to future minimum lease payments under non-cancellable operating leases as follows:
Amounts falling due:
Within one year
Between two and five years
After five years
Total
As at
31 March
2011
£m
As at
31 March
2010
£m
94.6
244.5
196.2
535.3
70.7
215.8
188.0
474.5
The financial commitments for operating lease amounts calculated as a percentage of revenue (‘revenue leases’) have been based on
the minimum payment that is required under the terms of the relevant lease. Under certain revenue leases, there are no minimums and
therefore no financial commitment is included in the table above. As a result, the amounts charged to the Income Statement may be
materially higher than the financial commitment at the prior year end.
The total of future minimum payments to be received under non-cancellable leases on investment properties and subleases on land and
buildings is as follows:
Amounts falling due:
Within one year
Between two and five years
After five years
Total
24. Capital commitments
Capital commitments contracted but not provided for:
– property, plant and equipment
– intangible assets
Total
Leases
Subleases
As at
31 March
2011
£m
As at
31 March
2010
£m
As at
31 March
2011
£m
As at
31 March
2010
£m
0.7
2.9
2.8
6.4
–
–
–
–
0.8
2.3
0.4
3.5
0.2
1.7
0.6
2.5
As at
31 March
2011
£m
As at
31 March
2010
£m
10.3
1.2
11.5
2.7
0.7
3.4
Contracted capital commitments represent contracts entered into by the year end and future work in respect of major capital
expenditure projects where activity has commenced by the year end relating to property, plant and equipment and intangible assets.
118
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. Contingent liabilities
Under the GUS Group UK tax payment arrangements, the Group was jointly and severally liable for any GUS liability attributable to the
period of the Group’s membership of this payment scheme. The Group’s membership of this scheme was terminated with effect from
31 March 2002.
26. Financial risk management
Other than derivatives, the Group’s principal financial instruments comprise cash and short-term deposits, external borrowings, trade
receivables, and trade and other payables arising directly from operations.
The Group’s activities expose it to a variety of financial risks: market risks (including foreign exchange risk, price risk and interest rate
risk), credit risk, liquidity risk and capital risk.
Risk management is carried out by Group Treasury to reduce financial risk and to ensure sufficient liquidity is available to meet
foreseeable needs and to invest in cash assets safely and profitably. This is done in close co-operation with the Group’s operating units.
Group Treasury does not operate as a profit centre and transacts only in relation to the underlying business requirements. The policies
of the Group Treasury department are reviewed and approved by the Board of Directors. The Group uses derivative instruments to
hedge certain risk exposures.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures.
The Group’s Income Statement is affected by transactions denominated in foreign currency. To reduce exposure to currency
fluctuations, the Group has a policy of hedging foreign currency denominated transactions by entering into forward foreign exchange
contracts (see note 16). The Group’s accounting policy in relation to derivative instruments is set out in note 2.
The Group’s Treasury risk management policy is to hedge anticipated cash flows in each major foreign currency that qualify as ‘highly
probable’ forecast transactions for hedge accounting purposes.
The Group monitors the desirability of hedging the net assets of overseas subsidiaries when translated into Sterling for reporting
purposes. It has not entered into any specific transactions for this purpose.
At 31 March 2011, the Group has performed sensitivity analysis to determine the effect of non-Sterling currencies
strengthening/weakening by 20% (2010: 20%) against Sterling with all other variables held constant. The effect of translating foreign
currency denominated net debt, receivables, payables and financial instruments at fair value through profit or loss would have
decreased/increased post-tax profit for the year by £0.1m (2010: decreased/increased £0.8m). The effect of translating forward foreign
exchange contracts designated as cash flow hedges and Sterling denominated loans held in overseas subsidiaries would have
decreased/increased equity by £11.4m (2010: £12.5m).
The following table shows the extent to which the Group has monetary assets and liabilities at the year end in currencies other than the
local currency of operation, after accounting for the effect of any specific forward foreign exchange contracts used to manage currency
exposure. Monetary assets and liabilities refer to cash, deposits, borrowings and amounts to be received or paid in cash. Foreign
exchange differences on retranslation of these assets and liabilities are recognised in the Income Statement.
Net foreign currency monetary assets/(liabilities) held in currencies other than the local currency of operation:
Sterling
US Dollar
Euro
Other currencies
Total
As at
31 March
2011
£m
As at
31 March
2010
£m
0.3
(0.7)
1.5
(0.3)
0.8
0.9
0.7
(1.9)
–
(0.3)
Burberry Group PLC annual report 2010/11 119
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26. Financial risk management (continued)
Price risk
The Group is exposed to employer’s national insurance liability due to the implementation of various employee share based
incentive schemes.
To reduce exposure to fluctuations in the employer’s national insurance liability due to movements in the Group’s share price, the
Group has a policy of entering into equity swaps at the time of granting share options and awards. The Group does not seek hedge
accounting treatment for equity swaps. The Group monitors its exposure to fluctuations in the employer’s national insurance liability
on an ongoing basis.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to cash, short-term deposits and external borrowings.
The external borrowings are linked to the LIBOR rate, while cash and short-term borrowings are affected by local market rates around
the Group. The borrowings at variable rates expose the Group to cash flow interest rate risk. To manage interest rate risk the Group
manages its proportion of fixed and floating rate borrowings to within limits approved by the Board using interest rate swap derivatives.
The Group has no outstanding interest rate swaps at 31 March 2011. During the prior year, the Group closed out an interest rate swap,
with a notional principal of US $65m, to convert floating rate borrowings into fixed rate borrowings, at a fixed interest rate of 3.545%.
The interest rate risk profile of the Group’s fixed and floating rate financial liabilities by currency is as follows:
Sterling
Other currencies
Total financial liabilities
As at 31 March 2011
As at 31 March 2010
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
Floating rate
financial
liabilities
£m
Fixed rate
financial
liabilities
£m
0.2
2.1
2.3
–
–
–
–
1.4
1.4
–
–
–
The floating rate financial liabilities at 31 March 2011 and 2010 exclude cash pool overdraft balances of £166.1m (2010: £205.0m).
At 31 March 2011, if interest rates on Sterling denominated borrowings had been 200 basis points higher/lower (2010: 200 basis points)
with all other variables held constant, post-tax profit for the year would have been £nil (2010: £0.1m) lower/higher, as a result of
higher/lower interest expense on floating rate borrowings.
The Group has no other significant floating rate foreign currency borrowings and therefore is not exposed to movements in foreign
currency interest rates.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales are made to customers
with an appropriate credit history. Sales to retail customers are made in cash or via major credit cards. In addition, receivables balances are
monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant and default rates have historically
been very low. An ageing of overdue receivables is included in note 14. The carrying amount of financial assets represents the maximum
credit exposure to the Group.
With respect to credit risk arising from other financial assets, which comprise cash and short-term deposits and certain derivative
instruments, the Group’s exposure to credit risk arises from the default of the counterparty with a maximum exposure equal to the
carrying value of these instruments. The Group has policies that limit the amount of credit exposure to any financial institution and
only deposits funds with independently rated financial institutions with a minimum rating of ’A’.
The Group has deposited €1.1m (2010: €0.2m), CHF 0.3m (2010: CHF 0.3m), BRL 0.6m (2010: BRL nil), INR 0.2m (2010: INR nil)
and TWD 10.0m (2010: TWD nil) which is held as collateral at a number of European banks.
120
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26. Financial risk management (continued)
Liquidity risk
The Group’s financial risk management policy aims to ensure that sufficient cash is maintained to meet foreseeable needs and close out
market positions. Due to the dynamic nature of the underlying business, Group Treasury aims to maintain flexibility in funding by keeping
committed credit lines available. For further details of this, see note 21.
All short-term trade creditors, accruals, bank overdrafts and borrowings mature within one year or less. The carrying value of all financial
liabilities due in less than one year is equal to their contractual undiscounted cash flows.
The contractual maturity profile of non-current financial liabilities is as follows:
As at 31 March 2011
In more than one year, but not more than two years
In more than two years, but not more than three years
In more than three years, but not more than four years
In more than four years, but not more than five years
In more than five years
Total financial liabilities
As at 31 March 2010
In more than one year, but not more than two years
In more than two years, but not more than three years
In more than three years, but not more than four years
In more than four years, but not more than five years
In more than five years
Total financial liabilities
Non-current
portion of
derivative
financial
liabilities
£m
Other
non-current
financial
liabilities
£m
–
–
–
–
–
–
0.2
–
–
–
–
0.2
2.6
2.0
1.0
0.6
151.2
157.4
3.2
0.9
0.7
0.6
0.3
5.7
Total
£m
2.6
2.0
1.0
0.6
151.2
157.4
3.4
0.9
0.7
0.6
0.3
5.9
Other non-current financial liabilities relate to lease liabilities, property-related accruals and the put option liability over non-controlling
interests. The put option liability is subject to a contractual cap of £200m.
Capital risk
The Group manages its capital (defined as net cash plus equity excluding non-controlling interests) to ensure that entities in the Group
are able to operate as going concerns and optimise returns to shareholders. At 31 March 2011, the Group had net cash of £297.9m
(2010: £262.0m) and total equity excluding non-controlling interests of £713.6m (2010: £590.1m).
Cash is used to fund the continued investment in the Group and growth of the global brand. It is also used to make routine outflows of
capital expenditure, tax and dividends. The Group’s dividend policy sets its payout target as 40% of adjusted EPS. The Board reviews
the Group’s dividend policy and funding requirements annually.
The Group is in compliance with the financial and other covenants within its committed bank credit facilities, and has been in
compliance throughout the financial year.
27. Employee costs
Staff costs, including the cost of directors, incurred during the year are as shown below. Directors’ remuneration, which is separately
disclosed in the Directors’ Remuneration Report on pages 76 to 85 and forms part of these financial statements, includes the notional
gains arising on the exercise of share options and awards but excludes the charge in respect of these share options and awards
recognised in the Group Income Statement.
Wages and salaries
Social security costs
Share based compensation (all awards and options settled in shares)
Other pension costs (note 19)
Total(1)
(1) Figures disclosed for the year to 31 March 2011 and 31 March 2010 include costs from both continuing and discontinued operations.
Year to
31 March
2011
£m
232.3
41.4
28.3
7.7
309.7
Year to
31 March
2010
£m
190.0
27.1
18.1
5.3
240.5
Burberry Group PLC annual report 2010/11 121
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
The average number of full-time equivalent employees (including executive directors) during the year was as follows:
Europe
Spain
Americas
Asia Pacific
Rest of World
Total(1)
Number of employees
Year to
31 March
2011
Year to
31 March
2010
2,986
430
1,385
1,733
147
6,681
2,285
892
1,285
1,056
90
5,608
(1) Figures disclosed for the year to 31 March 2011 and 31 March 2010 are for both continuing and discontinued operations.
Share options granted to directors and employees
The share option and award schemes have been valued using the Black-Scholes option pricing model. The Senior Executive Restricted
Share Plan and the Exceptional Performance Share Plan, both of which have market-based performance conditions attached, have
been valued using the Black-Scholes option pricing model with a discount applied to this value, based on information obtained by
running a Monte Carlo simulation model on the scheme.
Where applicable, equity swaps have been entered into to cover future employer’s national insurance liability (or overseas equivalent)
that may arise in respect of these schemes.
Savings-Related Share Option Scheme
In the financial year ended 31 March 2007, a Savings-Related Share Option Scheme (Sharesave) offering Burberry Group plc ordinary
shares was introduced for employees.
On 30 June 2010, further options were granted under this scheme with a three-year and five-year vesting period offered to employees.
The contract commencement date of the grant was 1 September 2010. These options are exercisable for a period of up to six months
from 1 September 2013 and 1 September 2015 for the three-year and five-year schemes respectively, with vesting dependent on
continued employment, as well as a saving obligation over the vesting period. The exercise price for these options is calculated at a
20% discount to market price over the three dealing days preceding the invitation date. Three day averages are calculated by taking
middle market quotations of a Burberry Group plc share from the London Stock Exchange.
The fair value of the options granted in the year has been calculated using a risk-free rate of 1.1%, expected volatility of 46.5% and
an expected dividend yield of 2.2%. The fair value per option for the grant was determined as £3.64. The Burberry share price at the
contract commencement date was £8.55.
Expected volatility was determined by calculating the historical annualised standard deviation of the market price of the shares over
a period of time, prior to the grant, equivalent to the life of the option.
Movements in the number of Sharesave share options in Burberry Group plc shares outstanding and their weighted average exercise
prices are as follows:
Outstanding at 1 April
Granted during the year
Lapsed during the year
Withdrawn during the year
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
Weighted
average
exercise
price
Number of
shares under
option as at
31 March 2011
Weighted
average
exercise
price
Number of
shares under
option as at
31 March 2010
383.5p
557.0p
424.3p
456.2p
472.3p
430.6p
505.0p
800,937
356,026
(88,892)
(48,153)
(156,647)
863,271
18,383
401.8p
321.0p
395.0p
411.1p
350.0p
383.5p
350.5p
1,007,438
410,974
(153,315)
(91,692)
(372,468)
800,937
130
The weighted average share price at the respective exercise dates in the year was £9.83 (2010: £5.25).
122
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
Sharesave options in Burberry Group plc shares outstanding at the end of the year have the following expiry dates and exercise prices:
Option term
23 June 2006 – 28 February 2010
30 March 2007 – 30 September 2010
24 August 2007 – 28 February 2011
28 September 2007 – 31 March 2011
26 June 2008 – 28 February 2012
30 June 2009 – 28 February 2013
30 June 2009 – 28 February 2015
30 June 2010 – 28 February 2014
30 June 2010 – 28 February 2016
Total
Number of
shares under
option as at
31 March 2011
Number of
shares under
option as at
31 March 2010
Exercise
price
350.5p
384.5p
505.0p
505.0p
399.0p
321.0p
321.0p
557.0p
557.0p
–
–
15,861
2,522
166,345
287,978
58,996
284,263
47,306
863,271
130
28,289
108,077
68,872
200,796
332,678
62,095
–
–
800,937
Burberry Senior Executive Restricted Share Plan 2004 (the RSP)
In June and November 2010, further awards of 2,439,400 and 61,555 ordinary shares respectively were made to executive directors
and management under the RSP (2010: 5,475,895). Under the Plan, executive directors may be awarded shares, structured as nil-cost
options, up to a maximum value of two times base salary per annum.
Awards granted between 2004 and 2007 vest in full only if Burberry Group plc achieves at least upper quartile Total Shareholder
Return (TSR) relative to its global peers and at least 15% per annum profit before tax (PBT) growth. A proportion of an award (12.5%)
may vest if TSR performance exceeds the median of the peer group or if PBT growth exceeds 5% per annum over three years. Vesting
against each metric occurs on a straight line basis between threshold and maximum. Of the shares which meet the performance criteria,
50% vests after three years. The remaining 50% vests in two equal tranches on the fourth and fifth anniversaries of the date of grant.
Awards granted in 2009 and 2010 will vest in full only if Burberry Group plc achieves at least upper quartile TSR relative to its global
peers and at least 10% per annum PBT growth. A proportion of an award (12.5%) may vest if TSR performance exceeds the median
of the peer group or if PBT growth exceeds 3% per annum over three years. Vesting against each metric occurs on a straight line basis
between threshold and maximum. Of the shares which meet the performance criteria, 50% vests after three years. The remaining 50%
vests in two equal tranches on the fourth and fifth anniversaries of the date of grant.
Obligations under this plan will be met by the issue of ordinary shares of the Company.
Movements in the number of share awards outstanding are as follows:
Outstanding at 1 April
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
The weighted average share price at the respective exercise dates in the year was £9.00 (2010: £5.73).
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
9,311,476
2,500,955
6,478,852
5,475,895
(1,723,272)
(1,377,582)
(610,352)
(1,265,689)
9,478,807
9,311,476
96,146
146,813
Burberry Group PLC annual report 2010/11 123
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
Share awards outstanding at the end of the year have the following terms:
Term of the award
2 August 2004 – 1 August 2014
21 July 2005 – 20 July 2015
31 January 2006 – 30 January 2016
10 August 2006 – 9 August 2016
1 September 2006 – 31 August 2016
27 November 2006 – 26 November 2016
11 June 2007 – 10 June 2017
21 November 2007 – 20 November 2017
25 June 2008 – 24 June 2018
1 June 2009 – 31 May 2019
8 June 2009 – 7 June 2019
30 June 2009 – 29 June 2019
20 November 2009 – 19 November 2019
10 June 2010 – 9 June 2020
22 November 2010 – 21 November 2020
Total
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
16
26,777
–
2,021
87,557
95,339
172,822
268,666
2,125
6,770
10,000
13,773
367,725
1,782,458
53,806
1,307,387
5,095,992
1,192
5,500
16,184
2,360,956
61,555
298,541
1,357,402
5,376,924
1,500
5,500
11,795
–
–
9,478,807
9,311,476
For the following grants made during the year ended 31 March 2011, the fair value for the restricted shares with the PBT performance
condition was determined by applying the Black-Scholes option pricing model. A discount was applied to the restricted shares with the
TSR performance condition, by applying the Monte Carlo model. The fair value for these restricted shares was determined as shown below:
Fair value for the restricted shares
PBT performance condition
TSR performance condition
The key factors used in determining the fair value of the awards were as follows:
Weighted average share price at grant date
Exercise price
Life of award
Expected volatility
Risk free interest rate
10 June
2010
22 November
2010
£7.84
£3.90
£10.29
£5.12
10 June
2010
22 November
2010
£7.84
£nil
£10.29
£nil
Equivalent to
vesting period
Equivalent to
vesting period
49.3%
3.81%
48.4%
3.66%
Expected volatility was determined by calculating the historical annualised standard deviation of the market price of the shares over
a period of time, prior to the grant, equivalent to the life of the option.
Burberry Restricted Share Reinvestment Plan
On 21 July 2005, awards in respect of a total of 782,500 ordinary shares were made to senior management under the Burberry
Restricted Share Reinvestment Plan.
The awards vested in two stages: 50% were exercisable after three years and the remaining 50% became exercisable after four years.
The vesting of these share awards was dependent on the employee continuing to hold the original IPO RSP shares which were awarded
and which vested on 11 July 2005. The vesting of these share awards was also dependent on continued employment over the vesting
period. The exercise price of these share awards was £nil.
At 1 April 2009, 278,750 share awards were outstanding, all of which were exercised during the year ended 31 March 2010 at
a weighted average share price of £4.94. No more share awards remain outstanding in relation to the Burberry Restricted Share
Reinvestment Plan.
124
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
The Burberry Senior Executive IPO Share Option Scheme (the IPO Option Scheme)
On 11 July 2002, options in respect of a total of 5,955,198 ordinary shares were made to executive directors and senior management
under the IPO Option Scheme. Participants were granted options with an exercise price equal to the price on flotation, £2.30 per
ordinary share.
The options vested in three stages: 33% were exercisable after one year, 33% were exercisable after two years and the remaining 33%
were exercisable after three years. Obligations under this scheme will be met by the issue of ordinary shares of the Company.
Movements in the number of share options outstanding and their weighted average exercise price are as follows:
Outstanding at 1 April
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
Weighted average
exercise price
Number of shares
under option as
at 31 March
2011
Weighted average
exercise price
Number of shares
under option as
at 31 March
2010
230.0p
230.0p
230.0p
230.0p
125,000
(15,000)
110,000
110,000
230.0p
230.0p
230.0p
230.0p
392,086
(267,086)
125,000
125,000
The weighted average share price at the respective exercise dates in the year was £11.09 (2010: £6.17).
Share options outstanding at the end of the year have the following terms and exercise prices:
Option term
11 July 2002 – 11 July 2012
Total
Exercise
price
230.0p
Number of shares
under option as
at 31 March 2011
Number of shares
under option as
at 31 March 2010
110,000
110,000
125,000
125,000
The Burberry Group plc Executive Share Option Scheme 2002
During previous financial years, options were granted to executive directors and senior management in respect of ordinary shares in the
Company under the Executive Share Option Scheme.
The options vested in three stages: 33% were exercisable after one year, 33% were exercisable after two years and the remaining
33% were exercisable after three years. The vesting of these share options was dependent on continued employment over the
vesting period.
Movements in the number of share options outstanding and their weighted average exercise prices are as follows:
Outstanding at 1 April
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
Weighted average
exercise price
Number of shares
under option as
at 31 March
2011
Weighted average
exercise price
Number of shares
under option as
at 31 March
2010
307.6p
351.7p
285.3p
285.3p
226,290
(76,038)
150,252
150,252
325.2p
331.7p
307.6p
307.6p
837,762
(611,472)
226,290
226,290
The weighted average share price at the respective exercise dates in the year was £9.56.
Share options outstanding at the end of the year have the following terms and exercise prices:
Option term
13 June 2003 – 12 June 2013
2 August 2004 – 1 August 2014
Total
Exercise
price
258.0p
378.0p
Number of shares
under option as
at 31 March 2011
Number of shares
under option as
at 31 March 2010
116,086
34,166
150,252
132,752
93,538
226,290
Burberry Group PLC annual report 2010/11 125
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
All Employee Share Plan
Employees are offered awards of ordinary shares in the Company at a nil exercise price under an All Employee Share Plan. In June and
July 2010, 182,280 and 84,600 ordinary shares respectively were granted under this scheme. All awards vest after three years and the
vesting of these share awards is dependent on continued employment over the vesting period.
The fair value of the awards was determined as £7.04 and £8.05 by applying the Black-Scholes option pricing model.
The key factors used in determining the fair value were as follows:
Weighted average share price at grant date
Exercise price
Life of award
Expected volatility
Risk free interest rate
1 June 2010
19 July 2010
£7.04
£nil
£8.05
£nil
Equivalent to
vesting period
Equivalent to
vesting period
49.2%
3.83%
49.4%
3.60%
Expected volatility was determined by calculating the historical annualised standard deviation of the continuously compounded rates of
return on the shares over a period of time, prior to the grant, equivalent to the life of the award. The average expected volatility over the
life of the award was used.
Movements in the number of share awards outstanding are as follows:
Outstanding at 1 April
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
Number of
awards as at
31 March 2011
81,103
266,880
(45,780)
(34,143)
268,060
47,800
Number of
awards as at
31 March 2010
141,830
–
–
(60,727)
81,103
81,103
Share options were exercised on a regular basis during the period. The weighted average share price during the period was £9.63
(2010: £5.25).
Share awards outstanding at the end of the year have the following terms:
Term of the award
12 July 2002 – 18 July 2082(1)
30 August 2003 – 18 July 2082(1)
20 August 2004 – 18 July 2082(1)
1 September 2005 – 18 July 2082(1)
1 June 2010 – 18 July 2082(1)
Total
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
8,000
9,950
17,250
12,600
220,260
268,060
13,850
15,900
24,650
26,703
–
81,103
(1) No date has been specified when awards lapse. The cessation date of the trust in which the awards are held is 18 July 2082.
The Burberry Co-Investment Plan
Executive directors and certain senior management are able to defer receipt of all or part of their annual bonus and invest it in ordinary
shares in the Company with up to a 2:1 match based on individual and Group performance during the year. The matching share awards
do not vest for three years and are forfeited if the executive leaves within that period. The exercise price of these share awards is £nil.
During the year to 31 March 2011 2,283,340 shares were awarded (2010: nil).
The 2010 awards are subject to secondary performance conditions: 25% of an award may vest if growth in PBT achieves 5% per
annum growth over three years, 100% may vest if growth in PBT exceeds 7% per annum, with vesting occurring on a straight line basis
between these points. None of the award shall vest if PBT growth is below 5% per annum.
126
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
The fair value of the awards was determined as £7.47 by applying the Black-Scholes option pricing model. The key factors used in
determining the fair value were as follows:
Weighted average share price at grant date
Exercise price
Life of award
Expected volatility
Risk free interest rate
9 June 2010
£7.47
£nil
Equivalent to
vesting period
49.2%
3.78%
Expected volatility was determined by calculating the historical annualised standard deviation of the continuously compounded rates of
return on the shares over a period of time, prior to the grant, equivalent to the life of the award. The average expected volatility over the
life of the award was used.
Movements in the number of share awards outstanding are as follows:
Outstanding at 1 April
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 March
Exercisable at 31 March
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
1,874,026
2,283,340
(9,507)
(189,691)
3,958,168
–
3,215,009
–
(4,343)
(1,336,640)
1,874,026
–
The weighted average share price at the respective exercise dates in the year was £8.20 (2010: £6.25).
Share awards outstanding at the end of the year have the following terms:
Term of the award
20 June 2007 – 19 June 2012
3 June 2008 – 2 June 2013
8 June 2010 – 7 June 2014
Total
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
–
1,678,435
2,279,733
3,958,168
147,895
1,726,131
–
1,874,026
The Burberry Exceptional Performance Share Plan
In 2007, awards in respect of a total of 4,210,000 ordinary shares were made to executive directors and senior management under
the Exceptional Performance Share Plan which was introduced as a one-off long-term incentive plan.
The awards vest in two stages: 50% are exercisable after three years and 50% are exercisable after four years. The vesting of these
share awards is dependent on two performance conditions. The award is based 50% on relative TSR and 50% on growth in profits
over the three and four year performance periods to 2010 and 2011. No awards vest unless Burberry’s TSR exceeds the median of the
comparator group or growth in adjusted PBT per share exceeds 50% over the four year performance period to 2010 or 75% over the
five year performance period to 2011. The vesting of these share awards is also dependent on continued employment over the vesting
period. The exercise price of these share awards is £nil.
Movements in the number of share awards outstanding are as follows:
Outstanding at 1 April
Exercised during the year
Lapsed during the year
Outstanding at 31 March
Exercisable at 31 March
Number of
awards as at
31 March 2011
3,935,000
(564,250)
(1,382,788)
1,987,962
35,837
Number of
awards as at
31 March 2010
3,935,000
–
–
3,935,000
–
Burberry Group PLC annual report 2010/11 127
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee costs (continued)
Share awards outstanding at the end of the year have the following terms:
Term of the award
26 July 2007 – 25 July 2012
21 November 2007 – 25 July 2012
Total
Number of
awards as at
31 March 2011
Number of
awards as at
31 March 2010
1,932,500
55,462
1,987,962
3,850,000
85,000
3,935,000
The weighted average share price at the respective exercise dates in the year was £9.22 (2010: £nil).
December 2010 One-Off Grant
On 8 December 2010, options in respect of 850,000 ordinary shares were granted as a one-off award.
The options are due to vest on 1 April 2015. Strategic and financial objectives linked to the long term growth of the Group must be
met in order for 500,000 of the options to vest. The vesting of all of the options is dependent on continued employment for the vesting
period. The exercise price of these share options is £nil.
The fair value of the awards was determined as £11.56 by applying the Black-Scholes option pricing model. The key factors used in
determining the fair value were as follows:
Weighted average share price at grant date
Exercise price
Life of award
Expected volatility
Risk free interest rate
8 December 2010
£11.56
£nil
Equivalent to
vesting period
40.9%
3.87%
Expected volatility was determined by calculating the historical annualised standard deviation of the continuously compounded rates of
return on the shares over a period of time, prior to the grant, equivalent to the life of the award. The average expected volatility over the
life of the award was used.
Movements in the number of share awards outstanding are as follows:
Outstanding at 1 April
Granted during the year
Outstanding at 31 March
Exercisable at 31 March
Share awards outstanding at the end of the year have the following terms:
Term of the award
8 December 2010 – 31 March 2016
Total
Number of
awards as at
31 March 2011
–
850,000
850,000
–
Number of
awards as at
31 March 2011
850,000
850,000
128
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. Business combinations
Burberry (Shanghai) Trading Co., Ltd
On 16 July 2010, the Group entered into an agreement to acquire the Burberry retail and distribution business within China from its
master franchisee in Hong Kong, Kwok Hang Holdings Ltd. The acquisition allows the Group to further leverage its proven brand in
China’s high growth luxury market.
On 1 September 2010, Burberry (Shanghai) Trading Co., Ltd, a wholly owned Group company incorporated in the People’s Republic
of China, took control of key store assets and inventory across 50 retail stores. Daily operations at 43 of the stores fully transferred to
the Group on that date. The remaining 7 stores had all transferred daily operations by 31 January 2011.
Details of the net assets acquired and goodwill are as follows:
Cash consideration
Deferred consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
£m
39.4
27.3
66.7
29.1
37.6
Sparkle Roll Holdings Limited, a non-Group company, retains a 15% economic interest in the Burberry retail and distribution business
within China. Recognition of this interest at acquisition date has given rise to additional goodwill of £2.5m. Put and call options exist
over this interest stake which are exercisable after five years in the case of the call option, and ten years in the case of the put option.
Refer to note 18 for further details of the carrying value of the put option liability.
In total, goodwill of £40.1m arose on the acquisition of the Chinese retail and distribution business and is included within intangible
assets. This is attributable to the acquisition of the distribution rights and the benefits expected from further expansion in this region.
The goodwill is not tax deductible.
The assets and liabilities arising from the acquisition are as follows:
Inventories
Property, plant and equipment
Liabilities
Net identifiable assets acquired
Net identifiable assets acquired attributable to non-controlling interest
Outflow of cash to acquire business, net of cash acquired:
Cash consideration on acquisition date
Cash consideration post-acquisition
Cash and cash equivalents in subsidiaries acquired
Cash outflow to acquire business
Fair value
£m
23.1
6.3
(0.3)
29.1
4.4
£m
39.4
12.5
–
51.9
The Group incurred transaction costs of £0.9m in respect of the acquisition.
The acquired China retail assets generated revenue of £77m and operating profit of £28m for the Group for the period to 31 March
2011, excluding any allocation of regional and corporate costs.
Pro forma full year information
Had the acquisition occurred on 1 April 2010, it would have contributed approximately £26m of additional Group revenue and
approximately £2m of additional Group operating profit for the year to 31 March 2011.
Burberry Group PLC annual report 2010/11 129
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29. Discontinued operations and assets classified as held for sale
In the year to 31 March 2010, the Group announced the restructuring of its Spanish operations. During the year, the production
of the local Spanish collection and related operations ceased. The Spanish operations have been treated as discontinued for the year
ended 31 March 2011, and the results from the discontinued operations have been shown separately from the results of the Group’s
continuing operations. The comparative Income Statement and supporting notes for the year ended 31 March 2010 have been
re-presented to show the results from the discontinued Spanish operations separately.
An analysis of the results of the discontinued Spanish operations is presented below:
Revenue
Cost of sales
Gross profit
Net operating expenses(1)
Operating loss
Net finance charges
Loss before taxation for discontinued operations
Taxation
Loss after taxation for discontinued operations
Year to
31 March
2011
£m
Year to
31 March
2010
£m
49.3
(24.8)
24.5
(30.7)
(6.2)
–
(6.2)
–
(6.2)
94.8
(52.0)
42.8
(88.2)
(45.4)
–
(45.4)
(25.0)
(70.4)
(1) Net operating expenses for the year to 31 March 2011 include £4.1m of restructuring costs related to the discontinued Spanish operations (2010: £45.4m). Included in this is a
charge of £3.7m in relation to the write-down of assets held for sale to fair value less costs to sell.
Cash flows generated from the discontinued Spanish operations have been included in the Group consolidated Statement of Cash
Flows. The cash flows relating to the discontinued operations for the years ended 31 March 2011 and 31 March 2010 are:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities(1)
Net decrease in cash and cash equivalents
Effect of exchange rate changes
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Year to
31 March
2011
£m
Year to
31 March
2010
£m
3.6
–
(7.9)
(4.3)
–
4.4
0.1
8.3
(2.8)
(21.4)
(15.9)
0.1
20.2
4.4
(1) The net cash outflow from financing activities represents the repayment of intercompany loans from Group entities which form part of continuing operations.
The earnings per share attributable to the discontinued Spanish operations for the years ended 31 March 2011 and 31 March 2010 are:
Earnings per share from discontinued operations
– basic
– diluted
Year to
31 March
2011
Year to
31 March
2010
(1.4)p
(1.4)p
(16.3)p
(15.9)p
Note
8
8
Assets classified as held for sale
In September 2010, £17.0m of assets were reclassified to assets held for sale, representing the carrying value of the freehold properties
in Spain. These assets have subsequently been written down to fair value less costs to sell. At 31 March 2011, the carrying value of the
assets is £13.5m.
130
Burberry Group PLC annual report 2010/11
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. The related party transactions relate to total compensation in respect of key
management, who are defined as the Board of Directors and certain members of senior management.
The total compensation in respect of key management for the year was as follows:
Salaries and short-term benefits
Post-employment benefits
Share based compensation
Total
Year to
31 March
2011
£m
Year to
31 March
2010
£m
9.7
0.3
7.0
17.0
8.6
0.3
4.0
12.9
The aggregate cost to the Group of the exercise of share options and awards to key management in the year to 31 March 2011 was
£1.0m (2010: £5.2m).
31. Auditor remuneration
Fees incurred during the year in relation to audit and non-audit services are analysed below. All work performed by the external auditors
is controlled by an authorisation policy agreed by the Audit Committee. The overriding principle precludes the auditors from engaging in
non-audit services that would compromise their independence. Non-audit services are provided by the auditors where they are best
placed to provide the service due to their previous experience or market leadership in a particular area.
Audit services in respect of the accounts of the Company
Audit services in respect of the accounts of subsidiary companies
Other audit services supplied pursuant to legislation
Services relating to taxation
– compliance services
– advisory services
Total(1)
Year to
31 March
2011
£m
Year to
31 March
2010
£m
0.1
1.1
0.1
0.3
0.3
1.9
0.1
1.6
0.3
0.4
0.4
2.8
(1) Figures disclosed for the year to 31 March 2011 and 31 March 2010 include costs for both continuing and discontinued operations.
Included in services relating to taxation above is £0.3m (2010: £0.2m) which arose in relation to advice on expatriate tax matters.
Burberry Group PLC annual report 2010/11 131
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32. Principal subsidiaries
Company
EMEA
Burberry Limited
Burberry Italy Retail Limited
The Scotch House Limited(1)
Woodrow-Universal Limited(1)
Burberry France SASU
Burberry (Suisse) SA(1)
Burberry Italy SRL(1)
Burberry (Deutschland) GmbH
Burberry (Austria) GmbH
Burberry Antwerp N.V.
Burberry Czech Rep s.r.o.
Burberry Hungary kft.
Burberry Ireland Limited
Burberry Netherlands BV
Country of incorporation Nature of business
UK
UK
UK
UK
France
Switzerland
Italy
Germany
Austria
Belgium
Czech Republic
Hungary
Ireland
Netherlands
Luxury goods retailer, wholesaler and licensor
Luxury goods retailer
Luxury goods brand and licensor
Textile manufacturer
Luxury goods retailer and wholesaler
Luxury goods retailer
Luxury goods wholesaler
Luxury goods retailer and wholesaler
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer
Burberry Middle East LLC (49%)
United Arab Emirates
Luxury goods retailer and wholesaler
Burberry India Private Limited (51%)
India
Luxury goods retailer and wholesaler
Spain
Burberry (Spain) S.A.
Burberry (Spain) Retail SL
Americas
Burberry Limited
Burberry (Wholesale) Limited
Burberry Canada Inc
Burberry Brasil Participacoes Ltd
Horseferry Mexico SA de CV
Asia Pacific
Spain
Spain
USA
USA
Canada
Brasil
Mexico
Luxury goods retailer and wholesaler
Luxury goods retailer
Luxury goods retailer
Luxury goods wholesaler
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer
Burberry (Shanghai) Trading Co., Ltd
Burberry Asia Limited
China
Hong Kong
Luxury goods retailer
Luxury goods retailer and wholesaler
Burberry (Singapore) Distribution Company Pte Ltd Singapore
Luxury goods retailer and wholesaler
Burberry Pacific Pty Ltd
Burberry Korea Limited
Burberry (Taiwan) Co Ltd
Burberry (Malaysia) Sdn. Bhd
Burberry Japan K.K.
Burberry International K.K. (51%)
Burberry Guam, Inc
(1) Held directly by Burberry Group plc.
Australia
Luxury goods retailer and wholesaler
Republic of Korea
Luxury goods retailer and wholesaler
Taiwan
Malaysia
Japan
Japan
Guam
Luxury goods retailer
Luxury goods retailer
Luxury goods retailer, wholesaler and licensor
Luxury goods retailer
Luxury goods retailer
In accordance with Section 410(2)(a) of the Companies Act 2006, the above information is provided solely in relation to principal subsidiaries.
As at 31 March 2011, all principal subsidiary undertakings are wholly owned except where indicated differently above and operate in
the country in which they are incorporated with the exception of Burberry Italy Retail Limited, which operates principally in Italy. All the
subsidiary undertakings have been consolidated as at 31 March 2011. Burberry has a 59% share in profits of Burberry Middle East LLC
and has the power to appoint the majority of directors. Non-operating intermediate holding and financing companies are excluded from
the list above.
Details of all Burberry subsidiaries will be annexed to the next Annual Return of Burberry Group plc to be filed at Companies House.
132
Burberry Group PLC annual report 2010/11
FIVE YEAR SUMMARY
Year to 31 March
Revenue by channel
Retail
Wholesale
Licensing
Total
Revenue by product
Womenswear
Menswear
Non-apparel
Childrenswear/Other
Retail/Wholesale
Licensing
Total
Revenue by destination
Europe
Spain
Americas(1)
Asia Pacific
Rest of World(1)
Retail/Wholesale
Licensing
Total
Profit by channel
Retail/Wholesale
Licensing
Adjusted operating profit(2)
Put option liability finance charge
Net interest expense
Restructuring costs
Goodwill impairment
Store impairments and onerous lease provisions
Negative goodwill
Relocation of headquarters
Project Atlas costs
Treorchy closure costs
Profit/(loss) on ordinary activities before
taxation
Tax on profit/(loss) on ordinary activities
Profit/(loss) on ordinary activities after
taxation
Margin analysis
Retail/Wholesale gross margin as percentage of
Retail/Wholesale revenue
Retail/Wholesale adjusted operating profit(2)
as a percentage of Retail/Wholesale revenue
Licensing adjusted operating profit(2)
as a percentage of Licensing revenue
Total adjusted operating profit(2)
as a percentage of revenue
2007
£m
410.1
354.1
86.1
850.3
£m
305.5
227.0
211.2
20.5
764.2
86.1
850.3
£m
229.8
151.8
196.5
167.5
18.6
764.2
86.1
850.3
£m
111.7
73.4
185.1
–
(0.7)
–
–
–
–
–
(21.6)
(6.5)
156.3
(46.1)
2008
£m
484.4
426.2
84.8
995.4
£m
345.2
247.8
289.7
27.9
910.6
84.8
995.4
£m
291.8
161.6
234.8
189.1
33.3
910.6
84.8
995.4
£m
135.6
70.6
206.2
–
(6.0)
–
–
–
–
15.1
(19.6)
–
195.7
(60.5)
110.2
135.2
%
%
56.9
14.6
85.2
21.8
58.5
14.9
83.3
20.7
Continuing operations
2009
£m
629.7
489.2
82.6
2010
£m
748.8
433.6
97.5
2010
£m
710.1
377.5
97.5
2011
£m
962.3
440.6
98.4
1,201.5
1,279.9
1,185.1
1,501.3
£m
412.8
298.4
366.3
41.4
£m
415.5
288.5
419.6
58.8
£m
373.4
249.4
416.6
48.2
£m
456.6
325.9
563.3
57.1
1,118.9
1,182.4
1,087.6
1,402.9
82.6
97.5
97.5
98.4
1,201.5
1,279.9
1,185.1
1,501.3
£m
379.8
144.5
308.9
240.0
45.7
£m
408.1
107.1
324.8
282.7
59.7
£m
421.8
–
324.7
282.7
58.4
£m
474.6
–
386.5
457.1
84.7
1,118.9
1,182.4
1,087.6
1,402.9
82.6
97.5
97.5
98.4
1,201.5
1,279.9
1,185.1
1,501.3
£m
110.1
70.7
180.8
–
(6.2)
(54.9)
(116.2)
(13.4)
1.7
(7.9)
–
–
(16.1)
11.0
(5.1)
%
£m
137.7
82.2
219.9
–
(5.1)
(48.8)
–
–
–
–
–
–
£m
137.7
82.2
219.9
–
(5.1)
(3.4)
–
–
–
–
–
–
£m
219.5
81.6
301.1
(3.2)
(3.2)
1.0
–
–
–
–
–
–
166.0
(83.8)
211.4
(58.8)
295.7
(83.2)
82.2
152.6
212.5
%
%
%
52.1
59.7
61.0
9.8
11.6
12.7
85.6
15.0
84.3
84.3
17.2
18.6
64.9
15.6
82.9
20.1
(1) Revenue amounts reported for 2009 have been restated on the adoption of IFRS 8.
(2) Adjusted for exceptional items.
Burberry Group PLC annual report 2010/11 133
FIVE YEAR SUMMARY continued
Year to 31 March
Earnings and dividends
Earnings per share – basic
Earnings per share from continuing operations – basic
Adjusted earnings per share – basic(1)
Earnings per share – diluted
Earnings per share from continuing operations – diluted
Adjusted earnings per share – diluted(1)
Dividend per share (on a paid basis)
2007
pence
per share
2008
pence
per share
2009
pence
per share
2010
pence
per share
2011
pence
per share
25.2
–
29.7
24.7
–
29.1
8.4
31.3
–
32.4
30.5
–
31.6
11.0
(1.4)
–
30.6
(1.4)
–
30.2
12.0
18.8
35.1
35.9
18.4
34.4
35.1
12.2
47.9
49.3
49.9
46.9
48.3
48.9
15.5
Diluted weighted average number of ordinary shares in issue during
the year (millions)
Dividend cover (on a paid basis)(2)
446.1
3.5
442.8
2.9
438.1
2.5
441.9
2.9
444.0
3.2
As at 31 March
Balance Sheet
Fixed assets and other intangible assets
Working capital (excluding cash and borrowings)
Other long-term liabilities
Net operating assets
Goodwill
Assets held for sale
Investment properties
Deferred consideration for acquisitions
Cash at bank, net of overdraft and borrowings
Taxation (including deferred taxation)
Net assets
Year to 31 March
Cash Flow
Adjusted operating profit from continuing and discontinued
operations(1)
Restructuring costs
Goodwill impairment
Store impairments and onerous lease provisions
Negative goodwill
Relocation of headquarters
Project Atlas costs
Treorchy closure costs
Operating profit/(loss) from continuing and discontinued operations
Depreciation, impairment, amortisation and negative goodwill
Loss/(profit) on disposal of fixed assets and similar
non-cash charges
Fair value (gains)/losses on derivative instruments
Charges in respect of employee share incentive schemes
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase in payables
Net cash inflow from operations before capital expenditure
Purchase of tangible and intangible assets
Proceeds from sale of property, plant and equipment
Net cash inflow from operations adjusted for
capital expenditure
(1) Adjusted for exceptional items.
(2) Based on adjusted diluted earnings per share.
2007
£m
179.5
136.1
(12.2)
303.4
116.9
–
–
(10.0)
(2.8)
(10.6)
396.9
2008
£m
197.8
260.0
(13.7)
444.1
130.1
–
–
–
(64.2)
(14.7)
495.3
2009
£m
283.0
221.2
(24.4)
479.8
33.1
–
–
–
7.6
23.4
543.9
2010
£m
285.8
61.3
(27.0)
320.1
34.9
–
–
–
262.0
(13.5)
603.5
2007
£m
2008
£m
2009
£m
2010
£m
185.1
206.2
–
–
–
–
–
(21.6)
(6.5)
157.0
26.7
1.1
–
10.8
(33.4)
(33.8)
32.8
161.2
(34.3)
0.1
–
–
–
–
15.1
(19.6)
–
201.7
32.2
(19.1)
(0.5)
14.3
(122.6)
(29.1)
28.8
105.7
(48.5)
28.3
180.8
(54.9)
(116.2)
(13.4)
1.7
(7.9)
–
–
(9.9)
174.7
2.0
10.7
4.5
55.7
2.1
2.2
242.0
(89.9)
0.1
219.9
(48.8)
–
–
–
–
–
–
171.1
60.0
4.2
(11.9)
18.1
87.4
56.2
40.5
425.6
(69.9)
–
2011
£m
323.4
103.4
(83.1)
343.7
73.1
13.5
3.0
(14.4)
297.9
16.9
733.7
2011
£m
299.0
(3.1)
–
–
–
–
–
–
295.9
66.3
1.1
(6.2)
28.3
(58.9)
(11.4)
51.3
366.4
(108.4)
–
127.0
85.5
152.2
355.7
258.0
134
Burberry Group PLC annual report 2010/11
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF BURBERRY GROUP PLC
We have audited the parent Company financial statements of Burberry Group plc for the year ended 31 March 2011 which comprise
the Company Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 86, the directors are responsible for the preparation of
the parent Company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the parent Company financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the parent Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the parent Company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 March 2011;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Directors’ Report for the financial year for which the parent Company financial statements are prepared
is consistent with the parent Company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of Burberry Group plc for the year ended 31 March 2011.
Andrew Kemp (Senior Statutory Auditor)
For and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, 25 May 2011
Burberry Group PLC annual report 2010/11 135
COMPANY BALANCE SHEET
Fixed assets
Investments
Other assets
Current assets
Debtors receivable within one year
Debtors receivable after one year
Derivative assets maturing within one year
Derivative assets maturing after one year
Cash at bank and in hand
Current liabilities
Creditors – amounts falling due within one year
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
As at
31 March
2011
£m
As at
31 March
2010
£m
Note
C
2,023.5
1,975.0
–
1.7
2,023.5
1,976.7
D
D
E
0.4
995.0
–
9.2
0.5
1,007.3
0.8
0.8
–
3.1
1,005.1
1,012.0
(214.2)
790.9
2,814.4
(2,246.5)
(1,234.5)
742.2
Creditors – amounts falling due after more than one year
E
(2,101.3)
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital reserve
Hedging reserve
Profit and loss account
Total equity
(1.4)
711.7
0.2
192.5
0.9
4.1
514.0
711.7
F
F
F
F
F
F
(0.2)
–
742.0
0.2
186.1
0.9
4.1
550.7
742.0
The financial statements on pages 136 to 140 were approved by the Board on 25 May 2011 and signed on its behalf by:
John Peace
Chairman
Stacey Cartwright
Executive Vice President, Chief Financial Officer
136
Burberry Group PLC annual report 2010/11
NOTES TO THE COMPANY FINANCIAL STATEMENTS
A. Basis of preparation
Burberry Group plc (‘the Company’) is the parent Company of the Burberry Group. Burberry Group plc is listed on the London Stock
Exchange and its principal business is investment.
Burberry Group is a global luxury goods manufacturer, wholesaler and retailer. Retail/Wholesale revenues are generated by the sale of
luxury goods through Burberry mainline stores, concessions and outlets as well as Burberry franchisees and prestige department stores
globally. Licensing revenues are generated through the receipt of royalties from Burberry’s licensees in Japan and global licensees of
fragrances, eyewear, timepieces and European childrenswear. All of the companies, which comprise Burberry Group, are controlled by
the Company either directly or indirectly.
These financial statements have been prepared on a going concern basis under the historical cost convention, with the exception of
financial instruments which are included in the financial statements at fair value, and in accordance with applicable accounting standards
in the United Kingdom and the Companies Act 2006.
B. Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Share schemes
Employees in Burberry Group (including executive directors) receive certain share incentives relating to Burberry Group plc shares.
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, i.e. market conditions. Vesting conditions which relate to non-market conditions are allowed for 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 is recharged to the relevant entity via a capital contribution. A corresponding increase
is recognised 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.
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 in the case of final dividends or when they are paid in respect of interim dividends.
Investments in Group companies
Investments in Group companies are stated at cost, less any provisions to reflect impairment in value.
Impairment of assets
Assets 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 net realisable value and value in use. For the purpose of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (income-generating units).
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at
the balance sheet date.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is
measured on an undiscounted basis.
Burberry Group PLC annual report 2010/11 137
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
B. Accounting policies (continued)
Derivative financial instruments
Financial instruments are reported and measured in accordance with FRS 25 and FRS 26 respectively. The Company used the
exemption not to present FRS 25 disclosures in the notes to the entity financial statements as full equivalent disclosures are presented
within the consolidated financial statements.
Equity swap contracts are marked to market with gains and losses arising on these contracts recognised in the profit and loss account.
Foreign currency transactions
Transactions denominated in foreign currencies are translated into Sterling at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies, which are held at the year end, are translated into Sterling at the
exchange rate ruling at the balance sheet date. Exchange differences on monetary items are recognised in the profit and loss account
in the period in which they arise.
Related party transactions
FRS 8 ‘Related Party Disclosures’ requires the disclosure of the details of material transactions and balances between the reporting
entity and related parties. The Company has taken advantage of the exemption under the terms of FRS 8 not to disclose details of
transactions with entities that are wholly owned subsidiaries.
C. Investments in Group companies
Cost
As at 31 March 2010
Additions
As at 31 March 2011
The principal subsidiaries of the Burberry Group are listed in note 32 of the Group financial statements.
D. Debtors
Amounts owed by Group companies
Prepayments and other debtors
Debtors receivable within one year
Amounts owed by Group companies
Prepayments
Debtors receivable after one year
Total debtors
£m
1,975.0
48.5
2,023.5
As at
31 March
2010
£m
1,006.6
0.7
1,007.3
–
0.8
0.8
1,008.1
As at
31 March
2011
£m
–
0.4
0.4
993.3
1.7
995.0
995.4
Included in amounts receivable from Group companies are loans of £74.7m (2010: £88.3m) which are interest bearing. The interest rate
earned is based on relevant national LIBOR equivalents plus 0.177%. The change in maturity of amounts owed by Group companies is
principally due to the renewal of loan agreements under extended terms.
138
Burberry Group PLC annual report 2010/11
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
E. Creditors
Amounts owed to Group companies
Accruals
Creditors – amounts falling due within one year
Amounts owed to Group companies
Accruals
Creditors – amounts falling due after more than one year
Total creditors
As at
31 March
2011
£m
214.0
0.2
214.2
2,100.9
0.4
2,101.3
2,315.5
As at
31 March
2010
£m
2,243.6
2.9
2,246.5
–
0.2
0.2
2,246.7
Amounts due to Group companies are unsecured, interest free and repayable on 1 March 2016. The change in maturity of amounts
owed to Group companies is principally due to the renewal of loan agreements under extended terms.
F. Capital and reserves
Allotted, called up and fully paid share capital
Ordinary shares of 0.05p (2010: 0.05p) each
As at 1 April 2010
Allotted on exercise of options during the year
As at 31 March 2011
Number
435,024,782
786,956
435,811,738
£m
0.2
–
0.2
As at 31 March 2011, 77,215 of the 0.05p ordinary shares in issue are held as treasury shares (2010: 77,215). As permitted by the
Companies Act 2006 the Company no longer has an authorised share capital having adopted new Articles of Association at the Annual
General Meeting in 2010.
Reconciliation of movement in Company shareholders’ funds
As at 31 March 2010
Retained profit for the year before dividends paid
Dividends paid
Total recognised gain for the year
Employee share option scheme
– value of share options granted
– exercise of share options
Purchase of shares by ESOP trusts
Sale of shares by ESOP trusts
As at 31 March 2011
Share
capital
£m
0.2
Share
premium
£m
186.1
–
–
–
–
–
–
–
–
–
–
–
6.4
–
–
Capital
reserve
£m
Profit and loss
account
£m
0.9
–
–
–
–
–
–
–
550.7
8.7
(67.4)
(58.7)
28.3
–
(6.6)
0.3
Hedging
reserve
£m
4.1
–
–
–
–
–
–
–
Total
equity
£m
742.0
8.7
(67.4)
(58.7)
28.3
6.4
(6.6)
0.3
0.2
192.5
0.9
514.0
4.1
711.7
Profit on ordinary activities, but before dividends payable, was £8.7m (2010: £146.2m). As permitted by section 408 of the Companies
Act 2006, the Company has not presented its own profit and loss account.
The Company has a general authority from shareholders, renewed at each Annual General Meeting, to repurchase a maximum
of 10% of its issued share capital. During the year to 31 March 2011, no ordinary shares were repurchased by the Company under
this authority.
The cost of own shares held by the Group has been offset against the profit and loss account, as the amounts paid reduce the profits
available for distribution by the Company. As at 31 March 2011 the amounts offset against this reserve are £2.8m (2010: £2.0m).
In the year to 31 March 2011 the Burberry Group plc ESOP trust has waived its entitlement to dividends of £nil (2010: £0.2m).
The capital reserve consists of non-distributable reserves and the capital redemption reserve arising on the purchase of own shares.
Burberry Group PLC annual report 2010/11 139
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
G. Dividends
Prior year final dividend paid 10.50p per share (2010: 8.65p)
Interim dividend paid 5.00p per share (2010: 3.50p)
Total
Year to
31 March
2011
£m
45.7
21.7
67.4
Year to
31 March
2010
£m
37.4
15.1
52.5
A final dividend in respect of the year to 31 March 2011 of 15.00p (2010: 10.50p) per share, amounting to £65.4m (2010: £45.7m),
has been proposed for approval by the shareholders at the Annual General Meeting subsequent to the balance sheet date. The final
dividend has not been recognised as a liability at the year end and will be paid on 4 August 2011 to shareholders on the register at the
close of business on 8 July 2011.
H. Financial guarantees
Burberry Group plc, together with Burberry Limited, Burberry Treasury Limited, Burberry Asia Limited, Burberry (Wholesale) Limited (US)
and Burberry Limited (US) make up the Guarantor Group for a £300m multi-currency revolving facility agreement which commenced
28 March 2011 and matures 30 June 2016. Interest is charged on this facility at LIBOR plus 0.90% on drawings less than £100m, at
LIBOR plus 1.05% on drawings between £100m and £200m, and at LIBOR plus 1.20% on drawings over £200m.
This facility replaces the £200m three year multi-currency revolving facility in place from 16 March 2009, which was due to mature on
30 June 2012, and the two bilateral multi-currency revolving credit facilities, totalling £60m, which were due to mature on 13 June 2011.
The fair value of the financial guarantee as at 31 March 2011 is £nil (2010: £nil).
A potential liability may arise in the future if one of the Group members defaults on the loan facility. Each guarantor, including
Burberry Group plc, would be liable to cover the amounts outstanding, including principal and interest elements.
I. Audit fees
The Company has not been recharged audit fees of £0.1m for the current year which are borne by Burberry Limited (2010: £0.1m).
140
Burberry Group PLC annual report 2010/11
SHAREHOLDER INFORMATION
General shareholder enquiries
Enquiries relating to shareholdings, such as the transfer of shares,
change of name or address, lost share certificates or dividend
cheques, should be referred to the Company’s Registrar,
Equiniti, using the details below:
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0871 384 2839
Tel: +44 121 415 7047 (from outside the UK)
Email: burberry@equiniti.com
American Depositary Receipts
The Company has a sponsored Level 1 American Depositary Receipt
(ADR) programme to enable US investors to purchase ADRs. Each
ADR represents two Burberry Group plc ordinary shares.
For queries relating to Burberry ADRs, please use the following
contact details:
Deutsche Bank Trust Company Americas
c/o American Stock Transfer & Trust Company
Peck Slip Station
PO Box 2050
New York, NY 10272-2050
Tel: toll free within the US: +1 800 301 3517
Tel: International: +1 (718) 921 8137
Email enquiries: DB@amstock.com
Annual General Meeting
The Company’s Annual General Meeting will be held on Thursday,
14 July 2011 at 9.30am at the offices of Slaughter and May:
One Bunhill Row
London
EC1Y 8YY
The Notice of Meeting, together with details of the business to be
conducted at the meeting, is available on the Company’s website
www.burberryplc.com.
The voting results for the 2011 Annual General Meeting will be
accessible on the Company’s website at www.burberryplc.com
shortly after the meeting.
Company website
This Annual Report and other information about the Company,
including share price information and details of results
announcements, is available on the Company’s website
www.burberryplc.com.
Dividends
Dividends can be paid by BACS directly into a UK bank account
on completion of a dividend mandate form, which is available from
Equiniti or online at www.shareview.co.uk.
Record date
Final date for return of DRIP mandate forms
Payment date
Interim dividend payable
8 July 2011
14 July 2011
4 August 2011
February 2012
The ADR local payment date will be approximately five business
days after the dividend payment date for ordinary shareholders.
Dividends payable in foreign currencies
Equiniti are able to pay dividends to shareholders in over
30 countries worldwide through the Overseas Payment Service.
An administrative fee will be deducted from each dividend
payment. Further details can be obtained from Equiniti or
online at www.shareview.co.uk.
Dividend Reinvestment Plan
Burberry’s Dividend Reinvestment Plan (DRIP) enables
shareholders to use their dividends to buy further shares in the
Company. Full details of the DRIP can be obtained from Equiniti
or online at www.shareview.co.uk. If you would like your final
dividend for 2011 and future dividends to qualify for the DRIP,
completed application forms must be received by Equiniti by
14 July 2011.
Duplicate accounts
Shareholders who have more than one account may avoid
duplicate mailings by contacting Equiniti and requesting the
amalgamation of their accounts.
Electronic communication
Shareholders may at any time choose to receive all shareholder
documentation in electronic form via the internet, rather than in
paper format. Shareholders who decide to register for this option
will receive an email each time shareholder documents are
published. Shareholders who wish to receive documentation in
electronic form should register online at www.shareview.co.uk.
Equiniti offers a range of shareholder information and services
online at www.shareview.co.uk. A textphone facility for those
with hearing difficulties is available by calling: 0871 384 2255
(or +44 121 415 7028 from outside the UK).
13 July 2011
14 July 2011
12 October 2011
15 November 2011
January 2012
April 2012
May 2012
Financial calendar
First quarter trading update
Annual General Meeting
First half trading update
Interim results announcement
Third quarter trading update
Second half trading update
Preliminary results announcement
Registered office
Burberry Group plc
Horseferry House
Horseferry Road
London
SW1P 2AW
Registered in England and Wales
Registered Number 03458224
www.burberryplc.com
Burberry Group PLC annual report 2010/11 141
SHAREHOLDER INFORMATION CONTINUED
Share dealing
The Company’s shares can be traded through most banks,
building societies or stock brokers. Equiniti offers a telephone
and internet dealing service. Terms and conditions and details
of the commission charges are available on request.
For telephone dealing please telephone 08456 037 037 between
8.00am and 4.30pm, Monday to Friday, and for internet dealing
visit www.shareview.co.uk/dealing. Shareholders will need their
reference number which can be found on their share certificate.
ShareGift
Shareholders with a small number of shares, the value of which
makes them uneconomic to sell, may wish to consider donating
their shares to charity through ShareGift, a donation scheme
operated by The Orr Mackintosh Foundation. A ShareGift donation
form can be obtained from Equiniti. Further information is available
at www.sharegift.org or by telephone on 020 7930 3737.
Share price information
The latest Burberry Group plc share price is available on the
Company’s website www.burberryplc.com.
Unauthorised brokers (boiler room scams)
Shareholders are advised to be wary of any unsolicited advice,
offers to buy shares at a discount or offers of free company
reports. These are typically from overseas-based ‘brokers’ who
target UK shareholders offering to sell them what often turn out
to be worthless or high-risk shares in US or UK investments.
These operations are commonly known as boiler rooms.
If you receive any unsolicited investment advice:
• Make sure you get the correct name of the person
and organisation
• Check that they are properly authorised by the FSA before
getting involved by visiting:
www.fsa.gov.uk/register/
• Report the matter to the FSA either by calling 0845 606 1234
or visiting:
www.fsa.gov.uk/pages/consumerinformation
• If the calls persist, hang up.
If you deal with an unauthorised firm, you will not be eligible to
receive payment under the Financial Services Compensation
Scheme. The FSA can be contacted by completing an online form
at http://www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/
form.shtml
Details of any share dealing facilities that the company endorses
will be included in company mailings.
More detailed information can be found on the FSA website at
www.fsa.gov.uk/pages/consumerinformation.
142
Burberry Group PLC annual report 2010/11
Executive TEAM
Executive directors
Angela Ahrendts
Chief Executive Officer
Stacey Cartwright
Executive Vice President
Chief Financial Officer
Senior management
Christopher Bailey
Chief Creative Officer
John Douglas
Chief Information Officer
Fabrizio Fabbro
Senior Vice President
Product Development
Alessandro Fabrini
Senior Vice President
Licensing
Carol Fairweather
Senior Vice President
Group Finance
Emilio Foa
Senior Vice President
Emerging Markets
Stephen Gilbert
Senior Vice President
Retail Development
Andy Janowski
Chief Operations Officer
William Kim
Senior Vice President
Digital Commerce
Donald Kohler
Senior Vice President
Planning
Andrew Maag
President, Europe
Michael Mahony
Senior Vice President
Commercial Affairs and General Counsel
Sarah Manley
Chief Marketing Officer
Matt McEvoy
Senior Vice President
Strategy and New Business Development
Pascal Perrier
President, Asia Pacific
Paul Price
Senior Vice President
Menswear and Non-Apparel
Reg Sindall
Executive Vice President
Corporate Resources
Michele Smith
Senior Vice President
Womenswear
Mark Taylor
Senior Vice President
Human Resources
Eugenia Ulasewicz
President, Americas
Burberry Group PLC annual report 2010/11 143
144
Burberry Group PLC annual report 2010/11
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Annual report 2010/11