full annual report burberry

8/2/2019 Full Annual Report Burberry

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Annual report 2010/11


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1

burberry

An iconic british luxury

brand established in 1856

leverages its rich heritage,proven strategies and

talented team to assure

sustainable, profitable

growth on a global scale

Contents

4 Financial highlights

8 Chairmans letter

12 Chie Executive Ocers letter

18 Executive team

22 Burberry Group overview

28 Strategy

44 Business and nancial review

54 Risk

58 Corporate responsibility

66 Board o Directors

68 Directors Report

71 Corporate governance

76 Directors Remuneration Report

86 Statement o directors responsibilities

87 Independent auditors report to the members o Burberry Group plc

88 Group income statement

89 Group statement o comprehensive income

90 Group balance sheet

91 Group statement o changes in equity

92 Group statement o cash fows

93 Notes to the nancial statements

133 Five year summary

135 Independent auditors report to the members o Burberry Group plc

136 Company balance sheet

137 Notes to the Company nancial statements

141 Shareholder inormation

143 Executive team


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4

FINANCIAL HIGHLIGHTS

DELIVERING RECORD PROFITS

1,501m

Total revenue (Year to March)

0 1501

1,501

850

995

1,202

1,185

1,280

11

07

08

09

10*

10

962m

Retail revenue (Year to March)

0 962

962

410

484

630

710

749

11

07

08

09

10*

10

441m

Wholesale revenue (Year to March)

0 489

441

354

426

489

377

434

11

07

08

09

10*

10

Revenue by channel in 2010/11

Retail 64%

Wholesale 29%

Licensing 7%


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5

301.1m

Adjusted operating profit (Year to March)

0.000000 301.100006

301.1

185.1

206.2

180.8

219.9

219.9

11

07

08

09

10*

10

Adjusted operating profit is stated before exceptional items

Reported operating profit 302.1m (2010: 216.5m)

297.9m

Net cash/(debt) (As at 31 March 2011)

0.000000 297.899994

11

07

08

09

10

297.9

(2.8)

(64.2)

262.0

7.6

48.9p

Adjusted diluted earnings per share (Year to March)

0.000000 48.900002

48.9

29.1

31.6

30.2

35.1

35.1

11

07

08

09

10*

10

Adjusted diluted EPS is stated before exceptional items

Reported diluted EPS 46.9p (2010: 18.4p)

20.0p

Dividend per share (Year to March)

0 20

20.0

10.5

12.0

14.0

12.0

11

07

08

09

10

2007-2009 and 2010* include the results of the discontinued Spanish operations. 2010 has beenrepresented to exclude the discontinued Spanish operations.


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8

CHAIRMANS LETTER

growth on this scale would not have been possible. In

nancial terms, disciplined execution o these strategies

over the ve year period has resulted in Burberrys 102%

revenue growth and 82% increase in operating prot, with

core retail/wholesale operating prot increasing 128% on a

112% revenue gain. This notwithstanding a nancial crisis

in mid-course.

The ve year nancial prole is capped by the record

2010/11 perormance. Total revenue grew 27% to

1,501m, a 24% gain at constant exchange rates.

Operating prot increased 37% to 301.1m, achieving an

historical high 15.6% retail/wholesale operating margin.Diluted EPS reached 48.9p, a 39% gain. Ater-tax return

on capital, at 35%, remained strong. All o these gures are

on an adjusted basis, and exclude the impact o the now

discontinued legacy business in Spain. The Group ended

the year with a 298m net cash balance. The Board has

recommended a 43% increase in the ull year dividend

to 20.0p.

Looking ahead. While on a secular basis, underlying trends

contributing to luxury growth wealth creation, rise o

growth market consumers, continuing consumer interest

appear avourable, the global macro environment suggests

some reserve.

Although Burberry was among the leading perormers

in the sector during 2010/11, a strong rebound in luxury

spending on the heels o recession lited most participants.

Despite some healthy headline orecasts, the current

climate includes distinct uncertainties record scal

decits in advanced economies, rising infation in high

growth economies and record commodity prices or

all. Political tensions in sensitive areas o the world also

present potential challenges. In short, the macro backdrop

may not be as avourable in 2011/12.

Near-term actors aside, the Boards optimism or

Burberrys uture remains in ull. The Group possesses a

clear and well executed strategy, world-class management

and design teams and a strong nancial prole, urtherenabled by a powerul culture capable o executing under

a range o market conditions. And the brand operates in

attractive markets with specic opportunities across the

spectrum. Burberrys results or the year and across this

volatile ve year period clearly demonstrate these qualities.

On behal o the Board and shareholders, I thank the team

around the world or their contributions to these excellent

results, and look orward to Burberrys urther progress.

John Peace, Chairman

An historic year or Burberry record revenue, margin and

prot. These results refect not only the most recent years

eort, but ve years o endeavour by this team.The ve key strategies, outlined urther in this report, have

been executed with lasting eect on the business and

business model. In terms o status, the Burberry brand

has clearly solidied its unique democratic positioning

within the luxury arena. Retail, the channel which

maximises the brands ability to manage consumer

perception, has become the primary route o distribution,

moving rom 43% o total revenue in 2005/06 to 64% in

2010/11 (greater adjusting or ull China integration)

while licensing activities have been largely conned to

three global categories and Japan, with the oundation set

or uture integration o the brands business in that market.

Burberry has also gained share across geographies, in

both developed markets such as the US and high growth

economies like the Middle East. Work in Asia, most

recently the acquisition o the brands store network in

China, has positioned Burberry well in this high growth

luxury region. In line with the strategy, attractive non-

apparel categories have been intensied, accounting or

40% o retail/wholesale revenue in 2010/11 relative to 29%

in 2005/06. Lastly, through a range o initiatives, including

development o an integrated supply chain and SAP

implementation throughout the majority o the business,

operational capability has been upgraded substantially.

Without this investment in inrastructure and expertise,


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12

Chief executive officers letter

At the most undamental level, managements primary

objectives are the continued development o the Burberry

brand and delivering sustained, protable growth over

the long term. These objectives are addressed through

a precise vision or the Group, a consistent strategy and

a distinctive set o values. Although the global recession o

2008-2009 slowed progress in some respects, we did not

compromise pursuit o either objective. With an improving

external environment in 2010/11, the team capitalised

on the expertise and inrastructure developed during

preceding years and the Groups strong nancial position

to accelerate investment in the brand and reassert thestrategic growth agenda.

Brand Investment

We have long held that great brands project a pure,

consistent experience across all channels in order to

standout in todays cluttered consumer arena. Sharp

denition communicates the point o dierence and

inorms consumer choice, while also conveying authenticity

and integrity, which are vitally important to a heritage brand

such as Burberry. A pure brand image captures mindshare.

Further, globally pervasive digital technology is altering

consumers relationships with brands both expectations

o, and ways o interacting with, them. Digitals capabilities

o movement, sound, inormation capacity andsel-navigation allow or an all-encompassing emotive

brand experience, which can be achieved anywhere

not conned to a brands physical environment, such

as a retail store. The technology has raised consumers

expectations or a voice in, and greater access to, the

brand. Consumers also increasingly expect transparency

and clarity with respect to the company behind the brand.

Burberry World launch. In line with these principles,

the Group launched Burberry World a website

providing the complete expression o the Burberry

brand, as well as ull e-commerce capability in the

nal quarter o 2010/11. Burberry World oers access

to the brands dening eatures, including heritageand archival imagery, behind-the-scenes ootage o

key events, such as runway shows and photo shoots,

philanthropic activity and comprehensive product views

and inormation the site contains the most complete

product assortment available or purchase anywhere.

Burberry World also connects the broader Burberry

community through Burberry Acoustic a site eaturing

music and videos rom emerging British artists and


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artothetrench.com, our social media site allowing

members to explore and share experiences o the iconic

trench coat. Beyond simply delivering an on-brand

interace online, our goal is to provide the perect,

complete Burberry experience. We are also reorienting

other consumer-related activity, including retail stores,

or multi-channel connectivity however a consumer

engages with the brand, the experience should be

consistent. In terms o its direct commerce implications,

we expect Burberry World to drive sales across all

channels digital (currently transactional in 45 countries

and six languages), retail, wholesale and licences through long-term consumer engagement and direct

merchandise access and inormation. Achieved through

substantial investment, this global platorm is the ocal

point or the brand.

Correcting legacy issues. Although great progress

has been made in revitalising the Burberry brand over

the last decade, inconsistencies with the modern

democratic luxury positioning remain. During the year,

the Group intensied investment in correcting these

legacy brand issues. In retail, while the outlet store

ormat is primarily an inventory management tool, parts

o the portolio are not appropriately aligned with the

brand; as a result, several outlet stores were closed

in the year, as others were upgraded, renovated and

expanded. In the wholesale channel, management

is concentrating distribution in ewer doors, those

consistent with the brands status, and improving

in-store presentation through several initiatives,

including an emphasis on dedicated real estate. In the

licensing arena, the year saw the impact o the Japan

leather goods licence termination, as part o the multi-

year process to align that market with the global brand.

Finally, with the Spring/Summer 2011 season, Burberry

largely completed the local-to-global product transition

in Spain. Each o these activities was undertaken

at a signicant cost to earnings, which will only be

recaptured over time through greater brand vitality. TheGroup will continue to take similar action to puriy brand

presence in the seasons ahead.

Reasserting the Growth Agenda

Condent in the long-term potential o the Burberry brand

and our design, marketing and retail-led business, we

reasserted the strategic growth agenda as the world

began to emerge rom recession.

China acquisition. In September, Burberry acquired

its store network in China rom a longstanding ranchise

partner or approximately 65m. China is the most

exciting luxury market in the world today, whether

dened by current size, growth rate or long-term

potential. Already estimated to be the ourth largest

luxury customer group globally, the Chinese consumeris projected to be the most important sector growth

driver both domestically and internationally over at

least the next ew years. In addition to the transaction,

under which the Group acquired 50 stores, the local

team opened an additional net seven stores during

the year. Since acquisition, the stores have achieved

approximately 30% sales gains on a year-over-year

basis. Burberry is well positioned in this market,

and the acquisition is a key growth platorm or the

brands uture.

Retail expansion. Retail investment accelerated with a

62% increase in store-related capital expenditure during

the year. Average space expanded 9%, excluding theChina acquisition, led by 28 mainline store additions,

many o which were clustered in high potential markets.

Investments included fagship stores in new markets,

including Beijing and Sydney the rst fagships in

China and Australia as well as established markets

such as London, Milan and Paris. Store renovation

activity also intensied to ensure the entire portolio

keeps pace with the brands aspirations and digital

presentation standards; major projects included

Las Vegas and Boston.

Marketing in the digital dimension. Marketing eorts

enlarging the brands digital dimension also intensied

in 2010/11. With digital content becoming a primaryvehicle to communicate brand identity and engage

consumers, we continued to invest in content, both in

terms o creation capability and volume. An expanded

team o digital experts develops rich bodies o

consumer-oriented content around any brand activity

the traditional still images o Burberrys main advertising

campaigns are now accompanied by sets o video


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14

Chief executive officers letter continued

stories, while simple product shots have become video

clips. A local ashion show or store opening becomes

a global event through l ive-streamed production.

Digital innovations, such as virtual trunk shows,

which allow runway show viewers to select items or

immediate purchase, urther immerse consumers in

the brand. To extend consumer reach, Burberry works

with leading digital media companies to distribute this

exciting content across their platorms. The Group

has also increased digital marketing investment through

greater use o email and online advertising. During

the year, the brand deepened engagement with itssocial media communities including the proprietary

artothetrench.com through the addition o dedicated

content and more requent interaction. With almost ve

million ans (at 31 March), Burberry is the leading luxury

brand on Facebook. Burberry has achieved a leadership

position within the luxury sector in the digital marketing

arena, and will continue to invest substantially in these

activities. Reerencing these and related initiatives,

Fast Company magazine named Burberry to its 2011

list o the worlds 50 most innovative companies.

Product intensifcation. In the product arena,

Burberry directed investment to both core and young

categories. To drive innovation in the core womens and

mens outerwear and large leather goods categories,

the design and merchandising teams explored a

wider range o exotic and luxury materials, pursued

technical innovation and broadened the highest ashion

components o the lines. The teams also reoriented

development processes around creating distinct

monthly product capsules to ensure a continuous fow

o new and compelling merchandise to stores. The

Group continued to invest in replenishment capability

with the goal o constant availability o continuity core

product at retail. Looking at young businesses, the

childrenswear operations, previously located in Spain,

were integrated with the London-based product

divisions, with additional resource commitment indesign and merchandising. The underdeveloped

womens shoe category benetted rom similar resource

intensication, as well as assortment expansion and

greater space allocation within our store network,

where sales growth accelerated in the year.

New market investment. Investment in new markets

also accelerated. Burberry launched its Latin America

strategy with a dedicated regional management team

and headquarters located in So Paulo, Brazil. The

team opened stores in Brasilia, So Paulo and Puebla,

Mexico during the year. Looking east, the Group urther

developed its joint operation to capitalise on the rapidly

growing consumer economy in India. Burberry now

has ve stores in this exciting market. Although in the

near term these operations incur signicant start-up

expenses, we expect them to contribute meaningully

to uture prot growth. In addition, through ranchisepartners, the Group entered our new markets in

2010/11, including Egypt and Mongolia.

Inrastructure investment. Reasserting the growth

agenda required continued evolution and investment in

inrastructure nance, inormation technology, human

resources, legal. Across the agenda rom disciplined

management o replenishment inventory to producing

digital events to meeting the structural requirements

o new markets these resources enabled and

contributed to growth in the year.

Culture and values

Alongside brand and growth, we continued to invest in our

culture. As a team, we look to reinorce a company culturecharacterised by

Shared vision or the uture o brand and business

Democratic and meritocratic ethos

Connected, collaborative style o interaction

Focus on the Burberry brand as the touchstone against

which all activity is measured

These principles relate directly to the brands core values:

to protect, explore and inspire. Investing (both mental

and nancial resources) in this culture encompasses a

broad range o initiatives, rom communication activities to

compensation structures and other employee benets toencouraging perormance standards which also extend

beyond the organisation to our partners. These uniting

cultural orces, along with our passion, emotion and

conviction, are as important to Burberrys success as the

ve strategic themes. Though a commercial enabler, this

culture equally denes the type o community we believe

in, and the type o company we want to be.


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Record fnancial results

In addition to investing or the uture, the team continued

to execute, achieving record revenue and proft in the year.

Revenue increased 27% to 1,501m. An 11% comparable

store sales gain combined with 9% space expansion and

a 12% contribution rom China to produce 36% retail

revenue growth (22% excluding the China acquisition) to

962m. Wholesale revenue increased 17% (26% ex-China)

to 441m. Licensing revenue was marginally ahead with

the eect o terminated Japan and apparel licences oset

by strength across global licences and currency gains.

Under the single brand, the Group is a well balancedportolio o businesses balanced diversity within each

o product, channel and region. With the exception o

the Japan licences, all parts o this portolio perormed

well in the year. Adjusted operating proft increased 37%

to 301m with adjusted retail/wholesale operating proft

growing 59% on a 29% revenue gain achieving an

historical high 15.6% adjusted retail/wholesale operating

margin. Notwithstanding the substantial investment,

the Group ended the year with net cash o 298m.

Looking ahead

In summary, its been an historic year or the Group,

the result o a united eort o employees, suppliers,

customers and licensing and ranchise partners. We thank

this extended team or their commitment and partnership.

Turning to 2011/12, although the external environment

may be less certain, we look orward with optimism.

The brand is well positioned, the strategies are eective,

the team is united and the consumer engaged. We will

continue to invest to realise the potential o this great

brand and business.

Angela Ahrendts, Chie Executive Ofcer

48.9Pin 2010/11 +39%

Growth in adjusted diluted EPSis a key valuation metric for Burberrys shareholders

11

09

10

10*

07

08

48.9

30.2

35.1

35.1

29.1

31.6

+39%

-4%

+16%

+21%

+9%

2007-2009 and 2010* include the result of the discontinued Spanish operations.

2010 has been represented to exclude the discontinued Spanish operations.


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EXECUTIVE TEAM

ACHIEVING balance through

Experience and talent


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BURBERRY GROUP OVERVIEW

A diversified business model

Burberry is a global luxury brand with a distinctive British heritage, core outerwear and large leather goods base,

and some o the most recognised icons in the world. Burberry designs and sources apparel and accessories,

selling through a diversifed network o retail, digital, wholesale and licensing channels worldwide.

The business is managed by channel, region and product, supported by corporate unctions.

Evolving channel mix

Burberry sells its products to the end consumer through both retail (including digital commerce) and wholesale channels.

For 2010/11, retail accounted or 64% o revenue and wholesale 29%. Burberry also has licensing agreements in Japan

and globally, leveraging the local and technical expertise o its licence partners.

RetailIncludes 174 mainline stores, 199concessions within department storesand 44 outlets, as well as digital commercearound the world

32% underlying growth (20% excluding

impact o China acquisition)

11% comparable store growth

Net 26 mainline store openings

in the year, including Beijing,

So Paulo and Mumbai

WholesaleIncludes sales to department stores,multi-brand specialty accounts and TravelRetail, as well as sales to its ranchiseeswho operate 56 Burberry stores, mainlyin Emerging Markets

16% underlying growth

(25% excluding impact oChina acquisition)

Strength rom Asia Pacic and the

Americas, particularly Asia Travel Retail

and US department stores

Entered our new markets with

ranchise partners (Armenia, Egypt,

Israel and Mongolia)

LicensingIncludes royalty income received romBurberrys licensees in Japan, its globallicensees or ragrance, eyewear andtimepieces, and a small Europeanchildrenswear licensee

4% underlying decline

Growth in global product licences osetby termination o Japanese leather goods

licence in 2010 and the nal regional

menswear licences

Greater integration between

strategy, product development

and digital marketing

64% 29% 7%

Revenue by channelExcluding the results o the discontinued Spanish operations. Underlying is calculated at constant exchange rates.


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Broad geographic portfolio

Burberry operates in our regions: Europe, Asia Pacifc, Americas and Rest o World.

Americas

Includes US, Canada,Central and South America

Up 16% underlying

Good progress in US

wholesale; expansion o real

estate in department stores

Three store openings in

Latin America (Brasilia and

So Paulo, Brazil and

Puebla, Mexico)

Europe

Excluding the results o thediscontinued Spanish operations

Up 15% underlying

Double-digit comparable

store sales growth; frst Brit

trial store in Europe opened

in Milan

Continued ocus on key

department store customers

and rationalisation o small,

non brand-enhancing speciality

accounts in wholesale

Rest o World

Up 43% underlying

Indian joint operation opened

three stores in Delhi, Mumbai

and Hyderabad

Burberry Middle East opened

frst two department store

concessions in Harvey

Nichols and Bloomingdales

Asia Pacifc

Includes China and the Japanesenon-apparel joint operation

Up 53% underlying

China acquisition completed

acquired stores comparable

growth about 30% in the

second hal

Flagship store opened

in Beijing

27% 34% 33% 6%

Retail and wholesale revenue by destinationExcluding the results o the discontinued Spanish operations. Underlying is calculated at constant exchange rates.


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BURBERRY GROUP OVERVIEW CONTINUED

40% 33% 23% 4%

pRODUCTS

Diversified offering

Within the Burberry oering, there is a product

hierarchy each collection with unique branding

and a distinct Burberry identity.

At the top is Burberry Prorsum, the most ashion

orward collection centred around catwalk/

runway shows each year. Prorsum, the Latin

word or moves orward, provides the design

inspiration or the brand.

In the centre o the pyramid is Burberry London or what a customer wears on weekdays or

work (tailored ready to wear).

And at the base o the pyramid is Burberry

Brit what a customer wears on the weekend

(casual wear), including Burberry Sport.

Collections are distinctly designed and

merchandised across the pyramid to drive the

brands revenue and protability. Outerwear

and non-apparel span all levels as Burberry

continues to innovate and diversiy these

core categories.

Non-apparel Up 32% underlying

Large leather goods

(handbags) about hal

o revenue

Small leather goods and

scarves outperormed

Womenswear Up 21% underlying

About 60% is outerwear;

Prorsum and London

collections outperormed

Growth balanced between

continued innovation

and replenishment

Childrenswear Up 23% underlying

Spring/Summer 2011

rst season managed by

London-based team

Foundation built rom

mens and womens

proven strategies

Menswear Up 29% underlying

About 40% is outerwear;

Prorsum and London

collections outperormed

Spring/Summer 2011 the

rst collection designed

entirely in-house

Retail and wholesale revenue by productExcluding the results o the discontinued Spanish operations.

BURBERRY

BRIT

BURBERRY

PRORSUM

BURBERRY

LONDON


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STRATEGY

BRAND AND BUSINESS

From its ounding in 1856, Burberry has become the leading British luxury brand globally.

The brand is defned by:

Britishness

Authentic outerwear heritage

Historic icons: the trench coat,

trademark check and Prorsum

knight logo

Democratic luxury positioning

Innovation and intuition

The business is driven by:

Design, marketing and

retail-led strategies

Digital ocus and integration

Channel diversity: retail,

digital commerce, wholesale

and licensing

Multi-category competency:

non-apparel, womenswear,

menswear and childrenswear

Global reach and balance:

across core regions and

emerging markets

The culture is distinguished by:

Core values: to protect,

explore and inspire

Democratic and meritocratic

ethos

Collaboration and

connectedness

Contributing to its communities,

including through the

Burberry Foundation

Unied and passionate teams are responsible or maintaining the integrity and vitality o this extraordinary brand while

continuing to develop a business which remains relevant to ever-evolving markets and consumer tastes. The ollowing

pages outline the Groups strategy under each o its ve key themes.

LEvERAGING

ThE

fRANchISE

INTENSIfYING

NoN-AppAREL

DEvELopmENT

AccELERATING

RETAIL-LED

GRowTh

INvESTING

IN UNDER-

pENETRATEDmARkETS

pURSUING

opERATIoNAL

ExcELLENcE

oUR STRATEGIc ThEmES


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STRATEGY coNTINUED

LEvERAGING ThE fRANchISE

Through more coordinated use o brand assets and greater integration o its global organisation, Burberry has

the opportunity to enhance consumer responsiveness and operate more efciently and eectively. This potential

lies both in the ront and back-o-house operations.

In 2010/11 Burberry was again included in Interbrands

Top 100 Global Brands; was awarded the 2010 British

Graduate 100 Award or Where Fashion Graduates Want

to Work; and was recognised as the 13th most innovative

company in the world by Fast Company magazine, as well

as receiving the Inaugural Innovation Award at the 2010

British Fashion Awards.

Product and marketing excellence underpin this brand

momentum. Key highlights in 2010/11 include:

Marketing innovation

LaunchednewBurberry.comsite

The rollout o the new Burberry.com website began

in the ourth quarter o 2010/11, with the site live in

six languages and transactional across 45 countries

by the year end. The site, known as Burberry World, is

the ultimate expression o the Burberry brand, allowing

customers globally in many cases or the rst time

to connect with all its aspects, rom heritage, to music

and video, to the ull product oer. Through the use o

dynamic audiovisual content the site becomes a place

to engage, entertain and interact, as well as providing

the ultimate online luxury shopping experience through

a personalised customer service oer that includes the

ability to Click to Chat and Click to Call in real time and

in 14 languages. The site provides a powerul locus

or ongoing eorts to build the Burberry community

around the world.

Extendedluxuryleadershippositioninsocialmedia

Engaging with social media is a urther critical part

o the Groups strategy to connect customers with

the Burberry brand. In 2010/11, Burberry urther built

its leadership position amongst luxury brands on

Facebook, ending the year with approaching ve million

ans, as well as almost 200,000 ollowers on Twitter

and over our mil lion channel views on YouTube. A key

milestone in late 2010/11 was the launch o the brand

on Chinese social media sites Sina Weibo, Kaixin001,

Douban and YouKu, having launched country-specicTwitter accounts in Brazil, Mexico, Japan, Turkey and

Korea earlier in the year. The Groups own social media

site, artothetrench.com, continued to inspire people

around the world and across generations to share their

experiences o the iconic trench coat. By the end o the

year, the site had received more than 11 million page

views since its launch in November 2009.

Continuedtransformationoffashionshows

Burberry continued to break new ground in the reach

and impact o its ashion shows. Previously closed

door events or invited guests, the use o livestream

technology allowed Burberry to take these key brand

moments to an ever-wider audience over the course o

the year, culminating with the livestream o the Burberry

Spring/Summer 2011 womenswear show, which has

been watched by over one million people across more

than 180 countries around the world. The introduction

o retail theatre technology allowed the livestreaming

o shows directly to fagship stores globally, while thedevelopment o instant digital commerce purchase

capability, supported by supply chain innovation, has

allowed customers or the rst time to buy directly

rom the runway or delivery in seven weeks. Further

innovations, such as the streaming o the September

2010 womenswear show in 3D to ve locations around

the world, and the hosting o the Autumn/Winter 2011

womenswear show on the iconic video screens in

Piccadilly Circus, London, have continued to broaden

reach and awareness.

Furtherdigitisationofthebrand

Continued investment and an intense ocus on

inrastructure development meant the Group was able

to accelerate the digitisation o the brand. In 2010/11,

the Group urther bolstered its world-class creative

and IT teams to remain at the oreront o innovation

and excellence in the creation and distribution o

digital assets.


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STRATEGY coNTINUED

LEvERAGING ThE fRANchISE coNTINUED

Product excellence

Keyapparelcategoriesoutperformance

Outerwear remains the core o the Burberry apparel

business, rom timeless iconic pieces to innovative

contemporary styles. A key growth driver, outerwear

accounted or over hal o mainline retail apparel sales

in the year. At the top end o the pyramid, ashion

outerwear drove outperormance rom Prorsum,

the runway collection that creates the halo or the

entire Burberry brand.

IntegratedmenswearSS11 saw the launch o the rst ully in-house global

menswear collection. Historically a licensed business,

the Group exited all 11 licences between 2006/07

and 2010/11, enabling the relaunch and repositioning

o this category. This rst pure collection drove

outperormance in menswear during the year,

with reported growth o 31%.

Furtherbuiltchildrenswear

Building childrenswear remains a key ocus or

the Group. Childrenswear was ormally integrated

into the global business in 2010/11, with the division

now located in the Groups London headquarters

and its product aligned with core design and

merchandising strategies.

2010/11 also saw the intensication o ongoing eorts

to correct those legacy issues that are inconsistent with

the global luxury positioning o the Burberry brand.A key ocus o this eort has been to upgrade the

brand positioning with wholesale partners. A number

o Japanese non-apparel licences were also terminated

during the year and the restructuring and transormation

o the Spanish business were succesully completed,

with the global collection rolled out across all channels

or the rst time rom SS11.

measuring ur rgress

Total revenue growth (Year to March) measures the appeal of the

brand to consumers, be it through Burberry stores or those of its

department store or specialty retail customers.

In 2010/11, Burberrys revenue was 1,501m a 24% underlying

increase on the previous year. China, which transferred from

wholesale to retail on 1 September 2010 following the acquisition

of the former franchisees operations, contributed 5% to this

underlying growth.

Growth rate is year-on-year underlying change i.e. at constant exchange rates.



1,501min 2010/11 +24%11

07

08

09

10

10*

1,501

850995

1,202

1,185

1,280

+24%

+15%

+18%

+7%

+1%

Retail Wholesale Licensing


35/148


36/148

34

STRATEGY coNTINUED

INTENSIfYING NoN-AppAREL DEvELopmENT

Intensiy and ocus on under-penetrated non-apparel categories to leverage urther Burberry design and merchandising

expertise and iconic branding through investment in product development, marketing and supply chain.

Non-apparel remains a key driver o growth, contributing

40% o retail/wholesale sales during the year. In 2010/11

it was again the Groups astest growing product category.

Largeleathergoods

Large leather goods remain the backbone o the

Burberry non-apparel business, representing about

50% o revenues in this category.

Mensaccessories

Mens accessories was amongst the strongest

perorming categories within non-apparel, albeit rom

a small base. Strong growth across wholesale andretail channels was driven by a signicantly expanded

assortment servicing increased demand. Consistent

global growth in this category was complemented by

a particularly strong perormance in certain markets

such as China, where the predominantly male

luxury consumer responded very positively to the

accessories oer.

Shoes

Womens shoes represent an important growth

opportunity or Burberry, reaching 7% o mainline

sales in 2010/11. Boots, a natural complement

to the Burberry outerwear oer, perormed

particularly strongly.

Licensing

Beauty

In June 2010, the Group launched its rst cosmetics

line, Burberry Beauty, with its ragrance licensee

Interparums. Reinorcing the brands core trench

and outerwear heritage through its ocus on natural,

eortless beauty, Burberry Beauty was rst introduced

as a test ormat through a limited number o wholesale

partners globally and later directly to customers on

burberry.com. Supported by digital assets and used in

all Burberry advertising campaigns and runway shows,

Burberry Beauty is enjoying a strong early responserom consumers and press as it approaches its

rst anniversary.

Globallicences

Burberry has three global licensing agreements:

ragrance (Interparums), timepieces (Fossil) and

eyewear (Luxottica). During the year, Burberry

strengthened its organisation to manage these

relationships more intensively, more closely aligning

strategies to unlock the potential o licensed products

in line with owned categories.

measuring ur rgress

Growth in non-apparel revenue (Year to March) measures the

success of Burberrys initiatives to expand in this category, which

includes handbags, small leather goods, scarves, shoes, belts

and jewellery.

In 2010/11, non-apparel revenue increased by 32% underlying

compared to 24% for Burberry as a whole. Non-apparel accounted

for 40% of retail/wholesale revenue, compared to 38% last year.

Handbags are core to non-apparel, representing about half of revenue.

Revenue is retail/wholesale only. Growth rate is year-on-year underlying change

i.e. at constant exchange rates.



563min 2010/11 +32%11

07

0809

10*

10

563

211

290366

417

420

+32%

+15%

+39%+12%

+10%


37/148


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36

STRATEGY coNTINUED

Aelerating RETAIL-LED GRowTh

Shit company culture and processes rom a static wholesale model to a dynamic retail model.

Retail-led growth reers not only to the operation o Burberrys own stores, but also to a undamental

shit in the Groups operating structure.

2010/11 saw strong progress in building the brands retail

presence globally.

Retailexpansionandoptimisation

A record number o new Burberry stores opened

around the world in 2010/11. A net 26 mainline stores

were opened during the year, including a new fagship

in Beijing, while a net 34 concessions were added. In

line with the Groups fagship cluster strategy, hal o the

new stores were opened in existing high prole markets,

while store renovations included major upgrades in

Boston and Las Vegas.

Digitalintegration

2010/11 saw investment in in-store Retail Theatre

technology to connect and leverage innovative content

across all platorms. This technology enabled Burberry

to synchronise completely consistent messages

to customers across all mediums or the rst time,

and oered an unrivalled audiovisual experience or

customers in stores. iPads were also introduced to

selected stores globally, allowing access to increased

inventory through Burberry World.

Productivitygains

A continued ocus on driving store productivity led

to the achievement o 11% comparable store sales

growth in the year. Average unit retail prices rose in

the period, while product fow and replenishment

capability improved. The Groups ongoing investment

in customer service standards was a key driver in

improving productivity, evolving to cover customer

interactions across all channels to deliver a consistently

high quality experience. A global Customer Service

team was established during the year to oer 24/7

tailored support to customers in 14 languages, bytelephone, email and through the new Click to Call

and Click to Chat unctions on Burberry World. Client

Services, which provides a personalised luxury service

to the Groups most important clients, expanded to 30

locations across the world, and the Burberry Experience

sales and service programme was successully

extended rom the Americas, Asia and Europe to

Emerging Markets including China.

Newconcepttests

The Brit store concept was rolled out urther in 2010/11,

ollowing the opening o the rst test store in New York

in late 2009. Five new stores showcasing this casual,

contemporary expression o the Burberry brand were

opened over the course o the year, including the rst

outside the US in Milan.

measuring ur rgress

Growth in retail revenue (Year to March) includes comparable store

sales growth (measuring growth in productivity of existing stores),

plus revenue from new space.

Growth rate is year-on-year underlying change i.e. at constant exchange rates.

Comparable store sales growth is defined as the annual percentage increase in sales

from stores that have been opened for more than 12 months, adjusted for closures

and refurbishments.

32%in 2010/1111

07

08

09

10

32%

24%

20%

14%

15%

Comparable stores New space China

Total retail sales increased by 32% underlying in the year. Comparable

store revenue growth increased by 11% (H1: 9%; H2: 13%), average

selling prices increased again in mainline stores and traffic benefited

from digital marketing initiatives. The transfer of China revenue from

wholesale to retail from 1 September 2010 following the acquisition

of the franchisees operations contributed 12%, with the balance

from new space.

Number of stores (As at March)measures the reach of Burberry

directly-operated stores around the world.

Excluding the discontinued business in Spain, the number of

stores directly operated by Burberry increased by 105 in 2010/11.

These included a net 26 new mainline stores, a net 34 new

concessions around the world (including 20 concessions in Spain

opened in Q4 to sell the global collection) as well as the acquisition

of 50 stores in China.

417as at March 201111

07

08

09

10

10*

417

292368

419

312

440

Mainline Concessions Outlets

2007-2009 and 2010* include the stores of the discontinued Spanish operations.



39/148


40/148

38

STRATEGY coNTINUED

INvESTING IN UNDER-pENETRATED mARkETS

Focus on and invest in under-penetrated markets. For Burberry, these consist o both developed markets like the

United States and emerging markets including China, India and the Middle East. All distribution channels and a variety

o business models are used to optimise these opportunities.

Key highlights in 2010/11 include:

Chinaacquisition

The acquisition o the Burberry business in China was a

clear highlight o the year. In September 2010, or about

65m, the Group acquired 50 stores across 30 cities,

which had previously been operated by its Hong Kong

based ranchisee. This acquisition gives the Group

control o the Burberry brand in the astest-growing

luxury market in the world. Ten new stores have already

been opened since the acquisition, including the

brands most digitally-advanced fagship in the world

in Beijing. Merchandising and inventory initiatives havesuccessully driven productivity in existing stores, with

comparative store sales up about 30% in the second

hal o the year.

ExtendedpresenceinLatinAmerica,Indiaand

newmarkets

Following the establishment o a joint operation in India

and the establishment o regional oces in So Paulo

and Dubai in 2009/10, the Group continued to extend

the Burberry presence in these high growth markets.

A major brand event in Mumbai in December 2010

marked the opening o the brands th store in India,

with related PR and marketing activity introducing the

brand to this young, digitally-aware customer base.

In Latin America, the Group opened its rst store in

the key city o So Paulo, and now has three stores

operating in Latin America. A total o 25 stores were

opened in Emerging Markets over the course o

2010/11. Through ranchise partners, the rst Burberry

stores were opened in Armenia, Egypt, Israel and

Mongolia during the year.

Buildingwholesale

The Group continued to invest in its wholesale

presence globally, building separate London, Brit andchildrenswear corners in department stores, exiting

generic outerwear departments and adding real

estate or menswear. A ocus on building in-season

replenishment capability supported growth. 2010/11

also saw a continued ocus on building the Burberry

Travel Retail business.

measuring ur rgress

Number of stores in Emerging Markets (As at March)

measures the reach of the Burberry brand in these high

potential countries.

Burberry added a net 25 stores in Emerging Markets, of which a net

seven stores were in China, five in the Middle East and three each

in India and Latin America. Of the 136 stores, 80 are directly operated,

of which 57 are in China, three in Latin America, 15 in the Burberry

Middle East joint operation and five in the Burberry India joint operation.

Emerging Markets include: China, the Middle East, Eastern Europe, Russia, Brazil,

India and other parts of South East Asia, South Africa and Latin America.

136as at March 201111

07

08

09

10

136

58

79

91

111


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40

STRATEGY coNTINUED

pURSUING opERATIoNAL ExcELLENcE

Burberry continues to pursue its goal to be recognised as much or operational expertise as or product

and marketing excellence.

A continued ocus on, and investment in, operational

excellence has driven improvements across all business

unctions, and has been a key enabler or ront-end innovation.

Enhancedcapabilities

Reinorcing and rening core back-end disciplines

was a central ocus again in 2010/11, specically

in replenishment, planning, logistics and sourcing.

Replenishment practices were enhanced across

all product categories, resulting in a nearly 50%

contribution o replenishment styles to mainline

sales over the year. Enhancing planning capabilities

enabled better execution and inventory managementand 2010/11 also saw the development o a global

pricing architecture. Improvements in sourcing drove

savings during the year and quality programmes were

introduced to actories and distribution centres globally.

Logistics enhancements enabled the execution o

monthly deliveries and ullment o in-season reorders.

Introducedmonthlyow

In 2010/11 the Group began to execute a synchronised

monthly fow o new product and foorsets across its

physical and virtual real estate, eatured in tailored

digital assets. Requiring a co-ordinated and integrated

approach across the business, rom Design, to

Merchandising, to Buying and Retail, this new approachintroduces a rereshed oer each month, while providing

a strong platorm rom which to connect customers

more regularly with the Burberry brand.

ContinuedSAPimplementation

The Group took urther steps towards the completion o

its implementation o SAP, with 80% o stores covered by

the end o the year and the incorporation o China and

Burberry Middle East scheduled or 2011/12. In addition,

between April and November 2010, Burberry successully

implemented a new, single SAP HR database or the

employee records o 6,500 employees in 25 countries

across Europe, the Americas and Asia. This is allowing

the Group to align its global HR processes and structures,

and is providing global visibility or the rst time.

PrioritisedorganisationaleffectivenessCloser collaborative relationships within the business

have been critical to the successul development and

implementation o Group initiatives. Further senior level

governance structures have been established during the

year to leverage operating best practice globally and to

co ordinate all capital investments. For example, IT has

become an integral partner to key marketing and retail

initiatives including Burberry World and Retail Theatre,

while supply chain innovation has been a key enabler

in allowing customers to purchase directly rom the

runway. The oundation was also set during the year or

the establishment o a global shared services team to

drive eciencies and enhance nancial control across

the business, while global strategy teams have been

established to build detailed medium to long-term views

or all regions. Externally, partnership working continues

to bring benets in key areas such as corporate

responsibility. Burberry joined the Ethical Trading Initiative

during the year, making it the rst luxury brand to do so.

measuring ur rgress

Retail/wholesale gross margin (Year to March) measures, among

other things, how efficiently Burberry sources its products.

64.9%in 2010/11

Gross margin in retail/wholesale increased by 390 basis points

to 64.9% in 2010/11 compared to the 61.0% margin the prior year

(excluding the discontinued Spanish operations) due to the shift

from wholesale to retail and increased replenishment.

11

07

08

09

10

10*

64.9%

56.9%

58.5%

52.1%

61.0%

59.7%



Adjusted retail/wholesale operating profit margin (Year to March)

measures how Burberrys initiatives and its investment to improve its

business processes, including sourcing, IT and logistics are impacting its

profit margin.

15.6%in 2010/1111

07

08

09

10*

10

15.6%

14.6%

14.9%

9.8%

12.7%

11.6%

Burberrys adjusted retail/wholesale operating profit margin increased

from 12.7% in 2009/10 (excluding the discontinued Spanish

operations) to 15.6%. Regional cost leverage was achieved despite

the shift from wholesale to retail and investment in new ventures.

Adjusted operating profit margin is stated before exceptional items.




43/148


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45/148


46/148

44

BUSINESS AND FINANCIAL REVIEW

GROUP FINANCIAL HIGHLIGHTS

+27% Revenue o 1,501m,up 27%

(2010: 1,185m)

15.6% Adjusted retail/wholesale operatingmargin at record level o 15.6%

(2010: 12.7%)

+39% Adjusted proft beore tax o297.9m up 39%

(2010: 214.8m)

27.9% Tax rate on adjusted proft beoretax o 27.9%

(2010: 27.4%)

+39% Adjusted diluted earnings per shareup 39% to 48.9p

(2010: 35.1p)

+43% Full year dividend per shareup 43% to 20.0p

(2010: 14.0p)

Year to 31 March* % change

million 2011 2010 reported FX underlying

Continuing operationsRevenue 1,501.3 1,185.1 27 24

Cost o sales (491.6) (423.9) (16)

Gross margin 1,009.7 761.2 33

Operating expenses# (708.6) (541.3) (31)

Adjusted operating proft 301.1 219.9 37 34

Net fnance charge# (3.2) (5.1) 37

Adjusted proft beore taxation 297.9 214.8 39 36

Exceptional items (2.2) (3.4)

Proft beore taxation 295.7 211.4

Taxation (83.2) (58.8)

Discontinued operations (6.2) (70.4)

Non-controlling interest 2.1 (0.8)

Attributable proft 208.4 81.4

Adjusted EPS (pence)~ 48.9 35.1

EPS (pence)~ 46.9 18.4

Weighted average number o ordinary shares (millions) 444.0 441.9

* FY 2010 has been re-presented to show the results o the discontinued Spanish operations separately. Discontinued operations in 2011include an operating loss o 2.1m (2010: nil), restructuring costs o 4.1m (2010: 45.4m) and a nil tax charge (2010: 25.0m).

Adjusted measures exclude restructuring costs and the Chinese put option liability fnance charge.

# Operating expenses in the table above exclude restructuring costs a 1.0m credit in 2011 (2010: 3.4m charge) included in the reported expenseso 707.6m (2010: 544.7m). The net fnance charge in the table above excludes a 3.2m Chinese put option liability fnance charge (2010: nil)included in the reported fnance charge o 6.4m (2010: 5.1m).

~ EPS is calculated on a diluted basis.


47/148

45

Retail

64% of revenue (2010: 60%); generated from 174

mainline stores, 199 concessions within department stores,

44 outlets and digital commerce

Retail sales increased by 32% on an underlying basis (36%at reported FX). China, which transerred rom wholesaleto retail on 1 September 2010 ollowing the acquisition othe ormer ranchisees operations, contributed 12% o thisunderlying growth. New space in other regions generateda urther 9% o the underlying growth.

Comparable store sales in the year increased by 11%(H1: 9%; H2: 13%), with mainline stores signicantlyoutperorming in line with the strategy. In mainline stores,average selling prices increased again, largely refectingmix (greater penetration o Burberry Prorsum and Londonwith continued outperormance rom outerwear) andimproved ull price sell-through. Trac beneted romdigital marketing initiatives and the introduction in thesecond hal o the year o monthly fow o products,oering newness or consumers. Replenishment stylesaccounted or nearly hal o mainline revenue up bynearly 10 percentage points in the last year.

Asia Pacic, where retail accounted or about 80% orevenue in the year, perormed strongly, with double-digitcomparable store sales growth throughout the period,led by Hong Kong and Taiwan. Excluding China, a netseven stores were opened in the region, o which ve wereclustered in Hong Kong. Comparable store sales growtho the acquired business in China was about 30% in thesecond hal. These sales were not included in Burberrys11% comparable growth in the year.

Europe delivered double-digit comparable growth in

the year, with the ocus o investment on both mainlinestores, including London Heathrow Terminal 5 and therst Burberry Brit trial outside the United States, in Milan,as well as new concessions or non-apparel and Brit inprestige department stores.

Americas perormance improved in the second hal othe year. In the United States, Burberry opened a urtherour Brit trial stores. Outside the United States, Burberryopened its ourth store in Canada, as well as its rst twostores in Brazil and its rst in Mexico.

The Burberry Middle East joint operation, with 15 storesin the region, delivered a strong ourth quarter due toincreased tourist activity. Further investment was made

in the Dubai regional oce and in retail expertise.

Average retail selling space increased by 18% in the year(H1: 11%; H2: 26%), o which China (both acquired andnew stores) contributed 9% in the year (H1: 3%; H2: 16%).

Revenue by channelYear to 31 March % change


Retail*# 962.3 710.1 36 32

Wholesale*# 440.6 377.5 17 16

Licensing 98.4 97.5 1 (4)

Revenue continuing operations 1,501.3 1,185.1 27 24

Discontinued Spanish operations 49.3 94.8 (48) (46)

1,550.6 1,279.9 21 19

* FY 2010 re-presented to exclude discontinued Spanish operations (retail 39m; wholesale 56m). FY 2011 Spain discontinued sales are26m retail; 23m wholesale.

# Burberry acquired its Chinese operations with eect rom 1 September 2010. Excluding China in both FY 2010 and FY 2011 gives underlyinggrowth o 20% in retail and 25% in wholesale.


48/148

46

BUSINESS AND FINANCIAL REVIEW CONTINUED

Wholesale

29% of revenue (2010: 32%); generated from sales to

department stores, multi-brand specialty accounts,

Emerging Market franchisees and Travel Retail

Excluding China, underlying wholesale revenue increasedby 25% in the year. This refects restocking by wholesalecustomers as well as robust consumer demand or theBurberry brand. Improved planning, supply chain andlogistics capabilities enabled Burberry to satisy higherin-season orders and to achieve better order ullmentrates. Menswear perormed very strongly, especially

in the second hal, as Spring/Summer 2011 was therst collection designed entirely in-house, ollowing thetermination o the nal regional menswear licences.

By region, Asia Pacic, the Americas and EmergingMarkets all perormed strongly. A net nine stores wereopened by ranchisees during the year. Europe, whichaccounts or about 40% o Group wholesale revenue,showed more moderate growth as the business continuedto ocus on key department store customers andrationalise small, non brand-enhancing specialty accounts.Initial sales o the Spring/Summer 2011 global collectionin Spain contributed 2% to the 25% underlying growthin the ull year (H1: nil; H2: 4% contribution to growth).

Including China, wholesale revenue increased by 16%on an underlying basis (up 17% at reported FX).

Licensing

7% of revenue (2010: 8%); of which approximately

two-thirds from Japan (split roughly two-thirds apparel

and one-third from various short-term non-apparel

licences) and the balance from global product licences

(fragrance, eyewear and timepieces) and European

wholesale childrenswear

Total licensing revenue in the year declined by 4% onan underlying basis, in line with guidance. Revenue wasup 1% at reported FX, refecting the strength o the yen,which is largely hedged 12 months orward.

The planned termination o the nal regional menswearlicences and the Japanese leather goods l icence reducedrevenue by 6m, as expected. Other Japanese royaltyincome was broadly fat year-on-year, while the globalproduct licences delivered double-digit growth.

During the year, Burberry strengthened its organisationto manage relationships with global product licenseesmore intensively, more closely aligning strategies torealise the potential o licensed products in line withowned categories. In December 2010, Burberry andInterparums extended certain terms o their ragrancelicence by one year.

Burberry continues to evaluate integration opportunitiesin licensing.


49/148

47

Adjusted operating proftYear to 31 March % change


Retail/wholesale 219.5 137.7 59 58

Licensing 81.6 82.2 (1) (6)

Adjusted operating proft 301.1 219.9 37 34

Adjusted operating margin 20.1% 18.6%

Retail/wholesale adjusted operating proftYear to 31 March % change

million 2011 2010 reported FX

Revenue 1,402.9 1,087.6 29

Cost o sales (491.6) (423.9) (16)

Gross margin 911.3 663.7 37

Gross margin 64.9% 61.0%

Operating expenses (691.8) (526.0) (32)

Adjusted operating proft 219.5137.7 59

Operating expenses as % o sales 49.3% 48.3%Adjusted operating margin 15.6% 12.7%

Adjusted operating prot in the year increasedby 37% to 301.1m, including a 6.3m benet

rom exchange rates.

Retail/wholesale adjusted operating prot grew by 59% to219.5m, up 82m year-on-year. A gross margin increaseo 390 basis points was partly oset by higher operatingexpenses as guided.

Gross margin

Gross margin or the year increased by 390 basis pointsto 64.9%. In the rst hal, gross margin improved by 670basis points, driven by increased ull price sell-throughresulting rom strategies implemented in the second halo the previous year. Following the 1,400 basis pointimprovement in the second hal o FY 2009/10, thesecond hal increase in FY 2010/11 was, as expected,more modest (up 170 basis points). This refected theshit to retail rom wholesale, a urther but more moderateimprovement in mainline sell-through and higher saleso replenishment styles, oset in part by a mix shit toBurberry Prorsum and London.

Operating expenses

Operating expenses as a percentage o revenue were49.3% in the ull year (H1: 49.5%; H2: 49.1%).

Regional expenses, which are about two-thirds o totalcosts, grew by less than the rate o sales growth, despitethe shit to retail and an increased investment o about40m in new ventures such as China, Latin America,India and the Japanese non-apparel joint operation.

This operating leverage was then re-invested in corporateinitiatives to drive uture growth, in areas such as design,customer service, IT and marketing. The cost o shareschemes increased by about 15m year-on-year, witha similar increase currently expected in FY 2011/12.


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48


Licensing operating proft

Year to 31 MarchYear to

31 March 2011

million 2011 2010 underlying

Revenue 98.4 97.5 94.0

Cost o sales

Gross margin 98.4 97.5 94.0

Gross margin 100% 100%

Operating expenses (16.8) (15.3) (17.0)

Operating proft 81.6 82.2 77.0

Operating margin 82.9% 84.3%

Licensing revenue declined by 4% on an underlying basis,up 1% at reported FX. With slightly higher operatingexpenses as Burberry strengthened its in-house team,operating prot was 81.6m, a margin o 82.9%.

Exceptional itemsYear to 31 March

million 2011 2010

Restructuring credit/(costs) 1.0 (3.4)

Chinese put option liabilitynance charge (3.2)

(2.2) (3.4)

Restructuring

The restructuring credit o 1.0m relates to the release o aprovision held in respect o the cost eciency programmeannounced in January 2009 (2010: 3.4m charge).

15% economic interest in the Chinese business

As disclosed at the time o the transaction, there isa 15% economic interest held by a third party in theacquired China business. As there is a put option whichis exercisable rom 2020, accounting rules state thatthe discounted value o the estimated ultimate liabilitymust be recognised on the balance sheet (47.3m at

31 March 2011). In subsequent periods, there may be twoadjustments taken through the income statement. Firstly,any change to the estimate o the ultimate liability will betaken through operating prot. Secondly, the unwind othe discount (together with the impact o any change indiscount rate) will be taken through interest. Both o thesewill be treated as exceptional items and excluded romadjusted prot beore tax. The 3.2m non-cash chargetaken in the year represents the unwind o the discountin the seven months since acquisition.

Taxation

In FY 2010/11, Burberry had a tax charge o 83m,giving a tax rate, as guided, o 27.9% (2010: 27.4%).

The tax rate on adjusted prot or FY 2011/12 is currentlyexpected to be about 27%.

Discontinued operationsBurberry has now largely completed the restructuringo its Spanish operations announced in February 2010.

The results have been included in discontinued operationsas below.

Year to 31 March

million 2011 2010

Adjusted operating result (2.1)

Restructuring costs (4.1) (45.4)

Taxation (25.0)

Loss or discontinuedSpanish operations (6.2) (70.4)

In FY 2010/11, the discontinued operations generatedsales o 49.3m (2010: 94.8m) and an adjusted operatingloss o 2.1m (2010: nil ). This is better than guided dueto more eective clearance o residual inventory and tightcost control during the exit period. In FY 2011/12, saleso the global collection in Spain through all channels willbe reported within Europe.

Following a small credit in the second hal, the chargeassociated with restructuring Spain was 4.1m in the year.Cash spend was 20m.


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49

Net cash and balance sheet

Net cash at 31 March 2011 was 298m, up rom 262mat 31 March 2010, nothwithstanding the 52m investmentto date in acquiring the China business and 108m ocapital expenditure. Working capital was broadly neutralin the year. Other major outfows were restructuring spend(20m), tax paid (98m) and dividends (69m).

Inventory at 31 March 2011 was 248m, an increaseo 49% year-on-year, refecting growth in the business.O the 81m increase, roughly one-third is in China andtwo-thirds is the investment to support monthly fow o

new products and increased replenishment.

In March 2011, Burberry renegotiated its revolving creditacility, now totalling 300m and maturing in June 2016.

The pricing and terms o this new acility are signicantlyimproved compared to the previous 260m acilities whichhave been cancelled.

Outlook

While mindul o the global macro challenges in 2011/12,Burberry remains condent in its strategies. With a strongnancial position, Burberry will continue to invest orgrowth in the current year.

Revenue

The ollowing guidance or retail, wholesale and licensingis consistent with that given in April 2011.

Retail

In the year to 31 March 2012, Burberry plans an increaseo 12-13% in average retail selling space. This includes anet 20-25 additional mainline stores with a bias towardsChina, Latin America and the Middle East. In addition,the 50 stores acquired in China will add about 12% toaverage selling space in the rst hal o the year.

Wholesale

In the six months to 30 September 2011, Burberryprojects wholesale revenue excluding China to increaseby a mid teens percentage at constant exchange

rates. Good progress is expected rom the Americas,Travel Retail and Emerging Markets and sales o theglobal collection in Spain are expected to continue tocontribute a low single-digit percentage to this growth.

Including China, wholesale revenue in the rst hal isprojected to increase by a mid single-digit percentageat constant exchange rates (2010: 226m).

Licensing

In the year to 31 March 2012, Burberry expectslicensing revenue at constant exchange rates toincrease by a mid single-digit percentage. This assumesall Japanese apparel and non-apparel royaltyincome is received at contractual minimum levelsas originally planned.

On this basis, underlying licensing revenue rom Japanis expected to be broadly fat year-on-year. A step-upin royalty income rom the apparel licence, which wasnegotiated in October 2009, will be oset by the plannedtermination o additional non-apparel licences in Japan.

The global ragrance, eyewear and timepieces productlicences are expected to deliver double-digit growth.

In the year to 31 March 2012, l icensing revenue atreported FX is expected to increase by a high single-digitpercentage, refecting a more avourable yen hedge rateyear-on-year.

Operating margin

In FY 2010/11, Burberry delivered a record adjustedretail/wholesale operating margin o 15.6%. Gross marginand operating expenses will continue to be dynamicallymanaged to enable urther investment in the business:

to evolve its business model, organisation andinrastructure (in areas including customer service,planning and supply chain);

to drive long term growth (including fagship transitionalcosts and digital initiatives across all channels).

For FY2011/12, Burberry expects to deliver a modestimprovement in operating margin. However, withinvestment weighted to the rst hal, operating marginin the six months to September 2011 is currentlyexpected to be lower than in the same period last year.

Capital expenditure

Capital expenditure in FY 2010/11 was 108m, belowguidance o around 130m, refecting delayed cashoutfow on certain projects.

In FY 2011/12, capital expenditure is planned at180-200m, partly refecting this delayed spend rom2010/11. Given the brand momentum and increasedstore productivity, the year-on-year uplit is mainly inretail, balanced between new stores and reurbishments.

New space growth is planned to accelerate to 12-13%(excluding acquired China stores), while the number omajor renovations is planned to increase signicantlyto between 15 and 20.

Retail investment will be clustered in fagship markets,including London, Paris and Milan; Chicago; and HongKong, Shanghai and So Paulo.

Investment in IT business projects will continue at around30m, with the emphasis on increasing connectivitybetween Burberry and its suppliers, employees,customers and partners.


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Store portolio

Directly-operated stores

Mainline stores Concessions Outlets Total Franchise stores

At 31 March 2010* 131 134 47 312 97

Additions# 28 45 2 75 13

Closures (2) (11) (7) (20) (4)

Transers~ 17 31 2 50 (50)

At 31 March 2011 174 199 44 417 56

* Excluding concessions in Spain.

# Including 20 concessions in Spain opened in Q4 to sell global collection.

~ Transers are the 50 acquired Chinese stores.

Store portolio by region

Directly-operated stores

At 31 March 2011 Mainline stores Concessions Outlets Total Franchise stores

Europe* 37 50 17 104 20

Asia Pacic 48 147 8 203 15

Americas# 72 18 90 3

Rest o World 17 2 1 20 18

Total 174 199 44 417 56

* Including 20 concessions in Spain opened in Q4 to sell global collection.

# Three ranchise stores in the Americas are in Mexico.

Sales to ranchise stores reported in wholesale revenue.


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54

RISK

PRINCIPAL RISKS

Eective management o risks is essential to the delivery o the Groups objectives, the achievement o sustainable

shareholder value, the protection o its reputation and meeting corporate governance requirements.

Risk Impact Mitigation

Loss o key management or the

inability to attract and retain

key employees.

The loss o key individuals or the inabilityto recruit and retain individuals with the

relevant talent and experience wouldadversely impact the Groups ability todeliver its strategies.

Competitive incentive arrangementsexist, with specic initiatives in place

designed to retain key individuals.Recruitment is ongoing and talentreview and succession planningprogrammes are in place.

The Groups operations depend

on IT systems and operational

inrastructure in order to trade

efciently. Increasingly technology

is also being used to stream major

events and to communicate through

social media.

A ailure in these systems or a denialo service could have a signicantimpact on the Groups operations andreputation, and potentially result in theloss o sensitive inormation. Negativesocial media campaigns could impacton the Groups reputation.

A number o controls to maintain theintegrity and eciency o the Groups ITsystems are in place, including recoveryplans which would be implemented inthe event o a major ailure. IT security iscontinually reviewed and updated.

Major incidents such as natural

catastrophes, global pandemics

or terrorist attacks aecting one

or more o the Groups key locationscould signifcantly impact

its operations.

A major incident at a key location wouldsignicantly impact business operations,the impact clearly varying depending on

the location and its nature. The impacto the loss o a distribution hub wouldclearly dier rom a global pandemic,but both would impact revenueand prots.

Business continuity plans are in placeto mitigate operational risks, but cannotensure the uninterrupted operation

o the business, particularly in theshort term. The regional spread o theGroups three key distribution hubs alsohelps to mitigate risk. There is a Groupincident management ramework inplace that addresses the reporting andmanagement o major incidents.

The risks set out below represent the principal risksand uncertainties which may adversely impact themanagement o the Group and the execution o its growthstrategies. The steps the Group takes to address theserisks, where they are matters within its control, are alsodescribed. Such steps will mitigate but not eliminate risks.Some o the risks relate to external actors which arebeyond the Groups control. The order o the risks is in noway an indication o their relative importance, and each othe risks should be considered independently. I more thanone o the events contemplated by the risks set out below

occur, it is possible that the combined overall eect osuch events may be compounded.

The Board has overall responsibility or ensuring thatrisks are eectively managed by the Group. The Boardhas delegated to the Audit Committee responsibilityor reviewing the eectiveness o the Groups systemo internal control and risk management methodology.Risks are ormally reviewed by the Group Risk Committeewhich meets at least three times a year. Key businessrisks are also considered as part o the Groups strategydevelopment and ongoing business review processes.

The risk assessment process has been enhanced duringthe nancial year incorporating best practice identied

during a benchmarking review. Please reer to theCorporate Governance section or urther details o theGroups risk management processes and internal controls.


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The Group operates in a number

o emerging markets which

are typically more volatile than

developed markets, and are subject

to changing economic, regulatory,social and political developments

that are beyond the Groups control.

Inrastructure and services also tend

to be less developed.

Seizure o assets or sta. Related party

business practice that is inconsistent

with the Groups ethical standards

and the UK regulatory environment.

Increased operational costs due tocountry specifc processes driven by

the regulatory environment.

The Group uses the services o

proessional consultants to advise

on legal and regulatory issues when

entering new markets, to undertake

due diligence and to monitor ongoingdevelopments. The Group has

strengthened the teams responsible or

its emerging markets operations and

works with ranchisees or joint operation

partners who compensate or its relative

lack o experience in a number o

these markets.

Failure by the Group or associated

third parties to act in accordance

with ethical standards.

A ailure to act appropriately could result

in penalties, adverse press coverage

and reputational damage with a

resulting drop in sales and proft.

A number o initiatives are in place,

led by the Corporate Responsibility

Committee which reports in to the

Group Risk Committee. These include

undertaking ethical visits and joining the

Ethical Trading Initiative, urther details

o which are set out in the Corporate

Responsibility report.

The Groups operations are subject

to a broad spectrum o regulatory

environments with which it needs

to comply. The pace o change

and the consistency o application

o legislation vary signifcantly

in the countries in which the

Group operates, particularly in an

environment where public sector

debt is oten high and tax revenues

are alling.

Failure to comply could leave the

Group open to civil and/or criminal legal

challenge, signifcant penalties and

reputational damage.

The Group continually monitors and

improves processes to gain assurance

that its licensees, suppliers, ranchisees,

distributors and agents comply with its

terms and conditions and relevant local

legislation and good practice.

Specialist teams at Group and regional

level, supported by third-party specialists

where required are responsible or ensuring

employees are aware o regulations

relevant to their roles. A number o

assurance processes are in place to

monitor compliance.

Over-reliance on key supplychain vendors.

The Group relies on a small numbero vendors in key product categories,

and or specialist digital and IT services.

Failure o one o these businesses to

deliver products or services would have a

signifcant impact on business operations.

The Group continues to strengthenits supply chain management team

to enable it to evolve and develop its

manuacturing base to reduce the

dependency on key vendors. The

Group has strengthened its internal

digital and IT teams during the year

and continues to acilitate knowledge

transer to internal resources. Annual

fnancial checks are carried out on all

key vendors.

The signifcant growth within the

business puts pressure on resources

and the supply chain.

Failure to eectively manage the pace

o change will inevitably adversely

impact the Groups operations and

return on investment.

Governance processes are in place

or each major strategic initiative and

these are supplemented by monthly

meetings with senior management

to review operational perormance.Management and operational structures

are continually reviewed to ensure that

these support the Groups growth.

The Group closely manages key

supplier relationships, which includes

the monitoring o fnancial and

non-fnancial perormance.


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A substantial proportion o Group

profts is reliant upon its licensed

business in Japan and other key

licensed product categories.

The Group expects licensees tomaintain operational and nancialcontrol over their businesses. Shouldlicensees ail to manage their operations

eectively or be aected by a majorincident, the royalty income maydecline directly impacting the protso the Group.

To minimise risks in Japan the Grouphas established its own operationsin Tokyo, and there are minimumroyalty payments specied in its

licence agreements, including theapparel licence with Sanyo Shokai andMitsui & Company. Under its licenceagreements, the Group can controlproduct development, marketingand distribution. Regular licenseeroyalty reviews take place to monitorcompliance with licence terms,which can manage but not eliminatenon-compliance.

Economic downturn. The Groups perormance remainsstrong; however, reduced consumerwealth driven by adverse economicconditions could lead to a reduction indemand, disrupt its supply chain or lead

to an increase in bad debts, all o whichwould impact sales and protability.

The global reach o Burberry helpsmitigate local economic risks.In addition, the Groups nancialreporting and review processes wouldhighlight any ongoing drop in demand.

Counterparty credit checks are in placeor all key customers and suppliers,and fexible payment terms are used toassist suppliers as required.

Unauthorised use o the

Groups trademarks and other

proprietary rights.

Trademarks and other intellectualproperty (IP) rights are undamentallyimportant to the Groups reputation,success and competitive position.Unauthorised use o these, as well asthe distribution o countereit products,damages the Burberry brand imageand prots.

The Groups global IP team has beenexpanded during the year to increasecover in emerging markets. Whereinringements are identied (oten inpartnerships with other luxury brandsand retailers) these are addressedthrough a mixture o criminal and civillegal action and negotiated settlement.

IP rights are largely driven by nationallaw and the Group cannot necessarilybe as eective in all jurisdictions in

addressing IP issues.

Inability to absorb commodity

price increases.

The Groups ability to produceproducts and deliver them on timedepends on the availability and price ocommodities, which fuctuate accordingto global economic conditions, weatherpatterns, civil unrest and naturaldisasters. Failure to obtain adequatesupplies, or supplies at the right time,will impact gross margin and prot.

The Groups agreements with suppliersare negotiated by its global sourcingteams in advance.

Anticipated benefts o acquisitions

and joint operations may not

be realised.

The Groups acquisitions, strategicalliances and joint operations may notyield the nancial outcomes expected,and can thereore impact sales,

protability and the return on investment.

In addition to rigorous due diligenceprocesses or acquisitions, using bothin-house experts and proessionaladvisers, post acquisition reviews are

also undertaken to ensure the businessis perorming in line with acquisitionbusiness plans.

RISK CONTINUED


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CORPORATE RESPONSIBILITY

EXCELLENCE IN PEOPLE

Seizing the energy o our brand and the passion o our people, we lead the evolution o an agile, connected Burberry,

creating the talent o today and tomorrow.

Burberry is part o an extended community made up oboth employees and external partners, with the twin aimso being a great brand, as well as a great company to workor and do business with.

Evolving the organisation, across regions and unctions,is a natural part o the business and has become secondnature. This year we have established a number ocross-unctional strategic decision councils that enableus to stay closely connected and make timely decisionsabout business priorities that support our ve key businessstrategies. Each strategic council is chaired and co-chaired

by a member o the Executive Strategic Council andindividuals rom cross-sections o the business are invitedto connect and collaborate based on their expertise.Examples o these councils include a Strategic CustomerCouncil, Strategic Innovation Council and StrategicResponsibility Council.

A more robust process to identiy talent and potentialwas also implemented during the year, to eed eectivesuccession and workorce planning, and elevate our existingLeadership Development programme and bi-annual TalentReviews. Every employee in the company is now eligibleto participate in the Groups reeshare plans and is in aperormance based incentive sc

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