Luxury brand Burberry reported a higher-than-expected profit in the first half and said it is looking optimistic about its new fragrance and beauty division which is to start operating next year.
Adjusted profit before tax (PBT) gained 6% to £173m during the six months to September 30th, up 7% on a reported basis. Consensus estimates were for £167m.
However, on a reported basis, PBT dropped from £159m to £112m due to exceptional items including a £73.8m charge relating to the termination of the fragrance and beauty licence relationship with French firm Interparfums (2011: nil).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The fragrance and beauty divisions are to be directly operated as a fifth production division, Burberry Beauty, from April 1st 2013, which Burberry said represents a "significant opportunity in under-penetrated opening price point categories". The company's other four divisions are accessories, womens, mens and childrens apparel.
The company said: "The ongoing strategy of greater brand control and integrating fragrance and beauty will enable Burberry to capitalise on the significant growth opportunities in these key opening price point product categories, where Burberry is under-penetrated compared to peers."
Revenue figures were already widely known after last month's pre-close trading update. Underlying revenues grew 8% to £883m, up 6% on a reported basis, while Retail revenues rose 10% underlying to £577m, up 9% on a reported basis.
"In retail/wholesale, which accounts for over 90% of our business, Burberry delivered 7% revenue growth, 11% profit growth and a further improvement in operating margin, all in a challenging external environment. Our five key strategies remain highly relevant and we continue to invest in our retail, digital and technology growth initiatives," said Chief Executive Officer Angela Ahrendts.
"Integrating fragrance and beauty is a significant brand and business opportunity. Our global teams are excited to partner with long-standing distributors, suppliers and customers to optimise these under-penetrated categories.One consistent brand expression, leveraged across all categories, will underpin future growth in the Beauty division and our existing core business."
The interim dividend was raised by 14% from 7.0p to 8.0p per share. Net cash improved to £237m, from £174m at the same point lat year.
-
How to invest in US small capsFor more than a decade, US small caps have lagged their larger counterparts. There are signs this is starting to change – here's how to stock up
-
Two investment trusts riding the AI boomRemain invested in investment trusts despite high valuations, as computing breakthroughs are likely to change the world
