Burberry ramps divi as profits top expectations

Burberry, the FTSE 100 luxury fashion retailer, has seen profits before tax rise 26% to £162m on revenues of £830m, up 29% on the equivalent period of 2010.

Earnings per share rose from 21.1p to 26.9p although net cash was down slightly on the same point of 2010 (£174m versus £181m).

The interim dividend has been raised by 40% to 7p per share.

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These strong numbers are broadly what analysts had been predicting following a series of impressive management updates this year. Charles Stanley and Credit Suisse had both forecast profit before tax of £159m.

The sales figures had been released in the October trading update so what brokers were really interested in, apart from the profit figure, were operating margins, cash flow and news on strategy.

On the retail/wholesale side, operating margin hardened to 14.9% from 14.8% the year before. With the licensing business included, the operating margin was 19.5%, down from 20.2% a year earlier; the Licensing division enjoyed an operating margin of 85.5%, down from 86.7% at the interim stage last year. The gross margin for the whole group rose to 66.7% from 64.3% in the first half of fiscal 2011.

For the full year, Burberry continues to expect a modest improvement in retail/wholesale operating margin.

Net cash at the end of September was £174m, down from £181m a year earlier. The major cash outflows in the first half included capital expenditure of £63m (2010: £47m), a seasonal working capital outflow of £108m (2010: £62m), tax of £49m (2010: £35m) and dividends of £68m (2010: £46m).

In addition, £42m was contributed to the Employee Share Option Plan (ESOP) trust which has purchased shares to satisfy historic share scheme awards.

There was no change to full-year guidance from that given in October. Planned capital expenditure remains in the £180m to £200m range for the current fiscal year, with a continued focus on flagship store openings and refurbishments in high profile markets.

Commenting on the results Angela Ahrendts, Chief Executive Officer, said: "Burberry has delivered a strong first half, reflecting our continued investment in innovative design, digital marketing and retail strategies."

She acknowledged however the current financial instability stemming from the Eurozone debt crisis: "We remain mindful of, and prepared to react to, any local or global uncertainties as we drive for long-term sustainable growth."

BS