Investment Case

Burberry operates in the luxury goods sector, where industry growth tends to deliver ahead of overall annual global Gross Domestic Product (GDP) growth. Our ambition, in the medium term, is to drive towards high single-digit top-line growth (from FY 2019/20 base at constant currency), driven by over performance of full-price sales. Revenue growth will be enabled by our strategy, leveraging the strong product offer we have established over the past few years, maintaining our focus on outerwear and leather goods and accelerating and strengthening our position in all key markets.

Burberry generated an adjusted operating profit margin of 16.9%, an increase of 50bps from FY 2019/20. In the medium term, our ambition is to deliver meaningful adjusted operating profit margin improvements (at constant currency). There are two significant factors underpinning our ambition:

Operating leverage

Leverage the fixed and semi-fixed cost components of our operating expenses.

Cost-efficiency programmes

Our current cost-saving programmes have delivered £185 million annualised cost savings in FY 2020/21. This was achieved by driving simplification and efficiency throughout our organisation, including optimising back-office functions, generating procurement savings, and through technology initiatives that increase our business agility.

Burberry has a capital allocation framework, which prioritises the use of cash, while maintaining an appropriate capital structure for the business. This is set out in further detail on page 55 of the Annual Report. Our uses of cash are summarised below.

Reinvest

Reinvest for organic growth.

Dividend

Pay a progressive dividend.

Strategic investment

Invest in strategic initiatives.

Capital returned

Return excess cash to shareholders.

Underpinned by retaining a solid investment grade credit rating.

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