Financial Reporting of Burberry

7/24/2019 Financial Reporting of Burberry

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Financial Report

Burberry Group Plc

Group Members:

Mubeen Muhammed (H00157204)

Shizah Shaukat (H00151175)

Raj Bahrani (H00171499)

Mohammed Salman (H001715!)

Hu"am #l $abbar %han (H0011717)

Shaheer &han'hi (H00151171)

Lecturer-Ms. Sunita Mathur



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Table of Contents:

1*e'uti+e Summar, -a.e

2Major /inan'ial Re-ortin. ""ue" -a.e

#nal,"i" o #nnual Re-ort -a.e 4 to 5

4redi'ti+e 3alue" -a.e !

5otential itall" -a.e 7 to

!on'lu"ion -a.e 9

7Reeren'e" -a.e 10

#--endi'e" -a.e 11 to 15



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Executive summary:

Burberr, -l' 6a" e"tabli"hed in 15!t i" a 6orld6ide e*tra+a.ant and lu*ur, brand 8he

'om-an," di"tin.ui"hin. tartan -attern ha" be'ome one o it" mo"t 6idel, 'o-ied trademark"

Burberr, i" kno6n mo"tl, or it" i'oni' tren'h 'oat: 6hi'h 6a" de"i.ned b, the ounder 8homa"

Burberr, him"el n the be.innin. o 199: the ne6 mana.ement .rou- at Burberr, "et out it"

ta'ti'" to re-o"ition and re+italize the brand: 6hi'h brou.ht about undamentall, enhan'ed

out'ome" and ortiied the ba"e to build the bu"ine"" ;ith 'ontinuou" .ro6th "in'e i+e ,ear":

Burberr, ha" 'onronted ne6 dii'ultie" o brand "u"tainabilit, and -o"itionin. in an

un-redi'table indu"tr, Hen'e: it re<uire" a -lan that la," oundation" or lon.term .ro6th and

al"o hel-" the 'om-an, to addre"" and "ol+e the i""ue" /or a lu*ur, brand: the maintenan'e o

the brand ima.e 'ome" a" a ir"t and oremo"t a'tor in order to "u"tain in the market Hen'e: the

'om-an, "hould tar.et it" 'ore 'u"tomer" and make "ure that the 'u"tomer" are 'om-letel,

"ati"ied B, im-lementin. thi" alternati+e: Burberr, 6ill be able to -rolon. it" brand -o"itionin.

in the a"hion indu"tr,

Major Financial Reporting Issues:

8here are "mall inan'ial re-ortin. i""ue" related to the inan'ial in"trument" b, Burberr,

Re.ardin. the 6hole"ale 'om-an, and "e-aratin. it" Beaut,: the bu"ine"" e*-e't" "ale" at 'ertain

trade rate" to minimize b, a +er, "mall -er'enta.e until the 1 "t o Mar'h 2015 (2014240

million)

8he 'om-an, threatened that i trade rate" "ta,ed 'on"i"tent then it 6ould ha+e a materiali"ti'

ee't on in'ome 2014 in'ome i" reba"ed 6ith the 'urrent trade rate": then the ne6l, re-orted

-roit" 6ould dramati'all, redu'e b, a 6ho--in. 25 million -ound" 8hu": thi" number 6ill

'au"e a de'rea"e o 05= rom 175= to 170=

Sin'e mo"t o Burberr," "ale" 'ome rom tra+eler": touri"t" and re"ident": thi" lead" to loatin.

international e*'han.e rate" Re"ear'her" in the mana.ement "e'tor in+e"ti.ated that "ale"

.ro6th de'rea"ed b, hine"e 'u"tomer" 6hil"t in the hou"ehold or online



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Analysis of Annual Report:

/rom the 'hairman" -er"-e'ti+e and the reeren'e" and number" -ro+ided in the inan'ial

"tatement" o Burberr, om-an,: Mr $ohn ea'e +er, 'learl, "tated that the 'om-an, i"de'larin. a "tron. ,ear in 20114

/rom the abo+e number" 6e 'an "ee that the 'om-an, i" .ro6in. 'ontinuou"l, in the ri.ht

dire'tion 6ith .eneratin. .ood amount o -roit" 6ith hi.h "ale" a" re'orded 8hereore the

'om-an, i" 'ontinuou"l, tr,in. to in+e"t it" hu.e amount in -uttin. re"our'e" into ran.e" that

en'oura.e the urther im-ro+ement in dierent "e'tor": in'ludin. internal 'orre"-onden'e

e*er'i"e": 'arrier ad+an'ement o--ortunitie": remuneration -lan" and hierar'hi'al a'ti+itie" >ot

onl, thi" the 'om-an, in+e"t a lar.e "um o 'a-ital in o-enin. o 25 "tore" and "e'ond head

oi'e 'on"tru'tin. in ?ondon to6ard the end o the ,ear

8he total re+enue o the 'om-an, in'rea"ed "ub"tantiall, to @2:0million rom @1:999million in

the -re+iou" ,ear 8hi" i" an in'rea"e o @1million: 6hi'h "tate" an a--ro*imate in'rea"e o

17= 8he re+enue doe" not onl, a''ount or one "e'tor but it i" 6idel, "-read throu.h dierent

mean" o 'hannel" or "ellin. it" -rodu't": "u'h a" 6hole"ale: retail and li'en"in.



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/or 201 to 2014 the retail and 6hole"ale a''ounted or 70= and 27= o re+enue re"-e'ti+el,

8he retail re+enue or the ,ear 6a" @1:!2million 6ith an underl,in. .ro6th o 15= and 12=

'om-arable "tore "ale" .ro6th An the other hand or the 6hole"ale 'hannel: the 'om-an,"re+enue a''ounted or @!2million and a 2= underl,in. .ro6th n it" ir"t ,ear o o-eration:

Beaut, 'ontributed to 6hole"ale re+enue o @144million: 6hi'h i" a -o"iti+e number or the ir"t

,ear o a--roa'h Mo+in. on to the li'en"in. 'hannel: the 'om-an, ha" li'en"in. a.reement"

.loball, 8he li'en"in. re+enue or the ,ear ended u- to be @79million 6ith a 2= .ro6th

e*'ludin. the ra.ran'e li'en"e in'ome 8hi" in'ome rele'ted .ro6th in .lobal 'ate.orie" to

ener.ize the -ha"e o it" de+elo-ment 6ith a "li.ht all in le.a', li'en"e" 6hi'h a''ounted or

2= underl,in. de'line

+en ater all the"e in'rement": the 'om-an, "till aim" to mo+e -ro.re""i+el, >ot onl, thi": but

the"e inan'ial number" are al"o 'on"i"tent 6ith the hairman" Re+ie6: Bu"ine"" Re+ie6 andthe &rou- /inan'ial Hi.hli.ht" >o 'ontradi'tion 'an be "een throu.hout the annual re-ort





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Return on Capital employe!: Profit before interest ∧tax

Capital Employed ×100

201E345.8

1052.8×100

F 24= 2014E445.4

1208.0×100

F !7=

Potential Pitfalls:

Retail Sector

Gross Profit Mar"in:Gross profit

sales ∗100

201E 2014E

1332.6

1889.3∗100

F 70!=1579.3

2250.6∗100

F 702=

2013 2014

70.50%

71.00%

71.50%

72.00%

72.50%

Gross prot margin

Gross proft

margin

Burberr, anal,ze" their .ro"" -roit mar.in" in an or.anized a"hion in order to obtain a''urate

mea"urement" o "u''e"" and ei'ien', #lthou.h the, aim to in'rea"e their -roit mar.in":

ho6e+er Burberr," retail .ro"" -roit mar.in re"ult 6a" ormed b, a 21= in'rea"e in 'o"t o

.ood" "old: b, u"in. hi.her <ualit, and e*-en"i+e material" in -rodu'tion 8he"e a'tor" 'au"ed

do6nall in .ro"" -roit rom 70!= to be'ome 702= and 'an thereore be "een a" a -otential

-itall

#peratin" Profit Mar"in: Net profit

sales ∗100



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201E 2014E

335.6

1889.3∗100

F 17=393.5

2250.6∗100

F 175=

2013 2014

70.50%71.00%

71.50%

72.00%

72.50%

perating prot margin

gross proft

margin

t 'an be ob"er+ed that there ha" been a -er'enta.e de'rea"e in o-eratin. -roit rom 201 to

2014 n thi" 'a"e: the de'rea"e ha" o''urred be'au"e Burberr," retail o-eratin. 'o"t" ha"

in'rea"e b, 19= n uture: i there i" no -o"iti+e o-eratin. -roit mar.in: then the 'om-an, mu"t

re-lan their bu"ine"" model

Overall Group Sector

Gross Profit Ratio:Gross profit

sales ∗100

201E 2014E

1442.0

1998.7∗100

F 7214=1658.5

2329.8∗100

F 711=



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2013 2014

70.50%

71.00%

71.50%

72.00%

72.50%

gross prot ratio

gross proft ratio

Ba"ed on the re"ult" abo+e: it 'an be "een that the 'om-an," o+erall .ro"" -roit ratio ha"

dro--ed 6ith a redu'tion o 15= rom 201 to 2014 8hi" ha" ha--ened due to in'rea"e in 'o"t

o "ale" #" material -ur'ha"ed rom "u--lier 'ould be o hi.h -ri'e

8hereore: numeri'al e+iden'e" abo+e 'learl, 'on+e, that the Burberr, ha" a +er, hi.h e*-o"ureto retail and thereore i" at .reater ri"k 6ith it" in+entorie" and 'om-etitor" in the market

!onclusion:

#" -er the .rou- inan'ial "tatement o ,ear 2012014: the inormation -ro+ided b, the board o

dire'tor" i" re"-on"ible and a''urate

8he -roit or the ,ear 201 6a" @2592 million and 2014 6a" @2 million in the in'ome

"tatement: 6hi'h "ho6" an in'rement o @71 Million: 6hi'h i" +er, im-ortant to a'hie+e in

order to .ain in+e"tor" 'oniden'e An an a+era.e: the 'om-an, i" -erormin. 'on"tru'ti+el,

6ell 6hi'h "ho6" a total re+enue .ro6th o 17= 8he, "tarted 6ith outer6ear like tren'h 'oat":/ir"t -rodu't b, Burberr,: and then introdu'ed more di+i"ion" o -rodu't: "u'h a" men" 6ear:

ra.ran'e": a''e""orie": 'hildren 6ear and the 'om-an, re'entl, lead into beaut, a" their ith

di+i"ion: 6hi'h i" doin. e*tremel, 6ell and e*-e't" to add the 'om-an," uture .ro6th b, 25=

in the u-'omin. ,ear Burberr, ha" a .ood 'om-etiti+e ad+anta.e a" the, kee- introdu'in. ne6

di+i"ion" o -rodu't kee-in. it" -a'e 6ith 'han.in. trend in the market

Burberr, +alue" their "hareholder" 6ith the hel- o di+idend" 6hi'h "ho6" an in'rement o 10=

or the ,ear 2012014 rom 290- to 20- 8he mana.ement 'ontinue" to -ur"ue the

-ro.re""i+e di+idend -oli', Moreo+er: the 'om-an, ha" a uture -lan to -ro.re"" rom

40=-a,out ratio to 50=-a,out ratio o+er a time -eriod o three ,ear" n #ddition: Burberr, i"doin. in'redibl, 6ell to maintain 'u"tomer relation to attra't more 'lient" and -ro+idin. be"t

.uideline" to -ull in more 'u"tomer" and -rote't the intere"t o their in+e"tor" Hen'e: be'au"e o

Burberr," "tabilit, and the o+erall -erorman'e: H; 'an in+e"t and e*-e't a -o"iti+e Return

on n+e"tment (RA) 8he abo+e "tatement" 'learl, "ho6 that in+e"tin. in Burberr, 6ill re"ult in

a -o"iti+e out'ome



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References:

Accounting-simplifed.com, (2014). Relevance of accounting information and its

examples. [Online] Available at !ttp""accounting-simplifed.com"fnancial-accounting"accounting-concepts-and-p#inciples"accounting-#elevance.!tml

[Accessed $ %ov. 2014].

&u#be##'plc.com, (2014). Burberry Group Plc . [online] Available at

!ttp"".bu#be##'plc.com" [Accessed $ %ov. 2014].

lc, b. (2014). BURBERRY GROUP PLC BRBY! London "toc# Exc$ange%! Earnings

Estimates & Business'ee# . [Online] &usinessee*.com. Available at

!ttp""investing.businessee*.com"#esea#c!"stoc*s"ea#nings"ea#nings.asp+

tic*e#&&/% [Accessed $ %ov. 2014].



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Financial Reporting of Burberry