Annual Report 2018/19

WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca - WorldReginfo ANNUAL REPORT 2018/19 ANNUAL REPORT 2018/19 FOUNDED IN 1856, BURBERRY IS A GLOBAL LUXURY BRAND WITH A DISTINCTLY BRITISH ATTITUDE. WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca CONTENTS STRATEGIC GOVERNANCE FINANCIAL REPORT REPORT STATEMENTS 4 Chairman’s Letter 92 Chairman’s Introduction 152 Statement of Directors’ Responsibilities 8 CEO's Letter 94 Board of Directors 153 Independent Auditor’s 13 Driving Positive Change 100 Corporate Governance Report to the Members Report of Burberry Group plc 14 Financial and Operational Highlights 101 Executive Committee 160 Group Income Statement 17 Business Model 103 Board Roles 161 Group Statement of Comprehensive Income 18 Luxury Market 114 Report of the Audit Environment Committee 162 Group Balance Sheet 22 Strategy 120 Report of the 163 Group Statement Nomination Committee of Changes in Equity 42 Responsibility 123 Directors’ Remuneration 164 Group Statement 56 Investment Case Report of Cash Flows 58 Key Performance 145 Directors’ Report 164 Analysis of Net Cash Indicators 165 Notes to the Financial 62 Stakeholder Statements Engagement 211 Five Year Summary 64 Non-Financial Information Statement 214 Company Balance Sheet 66 Financial Review 215 Company Statement of Changes in Equity 72 Capital Allocation Framework 216 Notes to the Company Financial Statements 74 Risk and Viability Report 224 Shareholder Information 1 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca STRATEGIC REPORT WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca STRATEGIC REPORT CHAIRMAN’S LETTER 4 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca DEAR SHAREHOLDER, there is meaningful two-way dialogue between our This is my first letter since succeeding Sir John workforce and the Board, as explained in the Peace as Chairman following the AGM on 12 July Corporate Governance Report on page 100. 2018. I would like to begin by paying tribute to Sir John for all he achieved during his 16 years as We are committed to being an industry leader Chairman of Burberry. Since becoming Chairman in responsible and sustainable luxury fashion, a I have immersed myself in the business, visiting commitment that underpins everything we do. our manufacturing sites, distribution centres, During the year we continued to make real retail stores and outlets and many of our key progress and more details on Burberry's offices across the world. During these visits I have approach to responsibility can be found on always been struck by the enthusiasm, dedication pages 42 to 55. and commitment of our teams and their passion for our unique Burberry brand. However, there were two significant instances, which reinforced our resolve in this area: the STRATEGY challenge in July 2018 to the industry-wide It has been an exciting year for Burberry with practice of destroying unsaleable finished the brand relaunch and our new Chief Creative products and a perception from our February Officer Riccardo Tisci’s debut collections both 2019 runway show that we lacked sensitivity landing well with consumers, influencers and our to important vulnerability and cultural issues in wholesale partners. We have also made significant our society. The Board, while very concerned progress on the evolution of our distribution about both incidents, is reassured by the total channels, our operational excellence programme commitment of Marco and our management and ensuring we have the talent to deliver our team to addressing these issues and by the strategy. These areas are explained in more detail speed and vigour of their response. on pages 22 to 41. We recognise that our strategy is all-absorbing and has had a huge impact on all SHAREHOLDER RETURNS parts of the business. We are currently at the apex The Group ended the year with a strong cash of our creative transition and our Chief Executive balance of £837 million, in line with the prior year Officer Marco Gobbetti and our management team after a £150 million share buyback and £171 million are managing the business dynamically through of dividends. Consequently, the Board has this exciting but challenging transformation. recommended a 3% increase in the full-year dividend to 42.5p, in line with our progressive CULTURE AND PURPOSE dividend policy, resulting in a 52% pay-out ratio Burberry has a unique culture, which is implicit in based on reported earnings per share. This everything we do. We are mindful of the changes reflects the Board’s continued confidence in introduced by the 2018 Corporate Governance the future growth of the business. Code and are working to articulate more explicitly and holistically our purpose and values and how they relate to all our stakeholders, not least our customers. We are also building on our formal and informal communication mechanisms to ensure 5 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca STRATEGIC REPORT “We are currently at the apex of our creative transition and we are managing the business dynamically through this exciting but challenging transformation.” Our approach to capital allocation is based on a FOCUS FOR THE FUTURE clear set of priorities that balance investment in In FY 2019/20, we will continue to focus on sustaining and growing our business, returning the creative transition and completing the first cash to our shareholders and maintaining a strong phase of our brand transformation. By the time balance sheet with solid credit ratings. we issue next year’s Annual Report, substantially all products in our mainline stores will be Over the past five years, Burberry has returned Riccardo’s. We are well on the way to completing around £808.7 million to shareholders through the rationalisation of our wholesale and retail dividends, and over the past three years has network and to establishing our new positioning. completed £600 million of share buybacks. We have approved a continuation of the share buyback We will refine our work on purpose and programme in FY 2019/20. responsibility as the year progresses and we will continue to invest in re-energising our products BOARD DEVELOPMENTS and our technology, our stores and our people, We have continued to focus on the evolution the pillars on which Burberry’s exciting future of the Board throughout the year. Our aim is to will rest. continue to refresh the Board with new and different perspectives while ensuring stability I would like to end by thanking all our colleagues and continuity during a period of transformation for their continued hard work and you our for the business. shareholders for your patience and support during this period of transformation. Changes to the Board during the year to 30 March 2019 are as follows: GERRY MURPHY Chairman • I joined the Board as Chairman designate on the 17 May 2018. • Sir John Peace retired from the Board following the AGM on the 12 July 2018. Our longest-serving directors, Stephanie George and Ian Carter will retire from the Board following our AGM in July. We will miss their wise counsel and thank them both for their outstanding service to Burberry during a period of enormous growth and value creation. 6 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca 7 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca STRATEGIC REPORT CEO’S LETTER 8 WorldReginfo - 181f223d-b11e-4e75-927d-560cc462acca DEAR SHAREHOLDER, INTRODUCING A NEW BURBERRY Looking back on the past 12 months, I am To signal a new era for the brand, we refreshed extremely proud of our people and the progress we our logo for the first time in 20 years and revived have made on our plan to transform and reposition the Thomas Burberry monogram inspired by our Burberry and deliver sustainable long-term value. heritage. We brought these to life in surprising, We achieved a huge amount in the period, starting engaging and impactful ways, generating with the launch of our new creative vision in the exceptional visibility and presenting the new summer and building to the delivery of Riccardo Burberry to millions of luxury consumers globally. Tisci's first collection in late February. Although we are only halfway through the first phase of We unveiled Riccardo's debut collection Kingdom Burberry’s transformation, the positive initial in London in September. His vision is of a Burberry reaction from customers is very encouraging. that is as much for the young as for the old. Street influences play as important a role as the codes of FY 2018/19 PERFORMANCE luxury and sophistication. The response from Our focus in this first phase is on investing to press and wholesale partners was excellent. re-energise our brand and aligning distribution to our new positioning, while creating the Digital innovation has never been more important foundations of a new product offering. Against in luxury and we asserted our leadership in this this backdrop, we delivered FY 2018/19 results area with our award-winning B Series. Available that met the objectives we had set for on social platforms, the monthly drop of limited- the business. edition products has proved extremely popular and attracted new and younger customers to the • Revenue was £2.7 billion, flat at reported rates, brand. We also partnered with Instagram to launch and up 2% at constant exchange rates (CER), checkout, a new feature enabling customers to buy excluding Beauty wholesale. products directly from the Burberry Instagram • Reported operating profit was £437 million, shop for a more seamless shopping experience. up 7%. • Adjusted operating profit was £438 million, Creating the right store environment for our unchanged at CER. brand is essential and over the course of the year, • Diluted Earnings Per Share (EPS) was 81.7p, we began to align our distribution network to our up 19%. new creative vision, starting with stores in key • Adjusted Diluted EPS was 82.1p, up 7% at CER. fashion cities, including London, Paris, New York, Seoul, Shanghai and Tokyo.

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