Burberry's half-year results are a step in the right direction following September's profits warning. However, it's a small step and the Christmas trading period is likely to be critical in recalibrating sentiment. The good news is that sales have not continued to plummet and margin gains helped turn a 7 per cent rise in underlying revenues into an 11 per cent increase in adjusted operating profits for the wholesale and retail divisions.
Growth has clearly waned substantially, though. In retail, which accounts for 65 per cent of sales, first-half underlying revenue growth of 10 per cent compared with 18 per cent in the previous six months and 45 per cent in the same period last year. The division should benefit in the second half from the plan to boost retail selling space by 14 per cent this year. Meanwhile, underlying wholesale sales - 29 per cent of the total - are expected to be flat in the second half following 5 per cent growth in the first half and 7 per cent growth in the preceding six months. Licensing sales fell 5 per cent.
The results were hit by a £73.8m exceptional charge relating to the decision to take control of its fragrance business. The company also recorded a £11.7m credit on a put option relating to its Chinese business, which actually reflects assumptions of lower growth in the region.
Broker Investec Securities forecasts full-year pre-tax profits of £394m and EPS of 65.6p (from £376m and 61.6p in 2012).
| Burberry (BRBY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,259p | MARKET VALUE: | £5.6bn | |
| TOUCH: | 1,259-1,260p | 12-MONTH HIGH: | 1,605p | LOW: 998p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 190p | NET CASH: | £237m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 830 | 159 | 26.7 | 7.00 |
| 2012 | 883 | 112 | 19.5 | 8.00 |
| % change | +6 | -29 | -27 | +14 |
Ex-div: 19 Dec Payment: 25 Jan *Includes intangible assets of £204m, or 46p a share | ||||
