EXECUTIVE SUMMARY

Example of excutive summary:

Purpose and focus: providing the goal of expanding its presence in new markets,
especially potential markets such as China, India, and countries in the Southeast Asia
region. In addition, Burberry needs to continue its commitment to the use of recycled
materials, emissions reduction, and research and development to meet market demand
and maintain its position as one of the leading brands in the world leading in the fashion
industry.

Methodology

Key figures

Markets

Findings

Conclusions/recommendations
 A. COMPANY OVERVIEW AND ANALYSIS
2.1 Overview of Burberry Group PLC
a. History of development

In 1856, The brand was founded by 21-year-old Thomas Burberry

19th
cent
ury

In 1901, the Burberry Equestrian Knight logo was developed, containing the Latin
word "Prorsum", meaning "forwards", and it was registered as a trademark in 1909
20 th
Burberry is acquired by the UK retailing group Great Universal Stores (GUS).
cent
ury

Barnett led the company up to its successful IPO in 2001.

Burberry Group plc was initially floated on the London Stock Exchange in July 2002.
21st In 2014, Burberry ranked 73rd on the list of the most valuable brands in the world, as
cent published by Best Global Brands.

ury

b. Major product and market

Burberry
Prorsum

Clothing Burberry
products London

Major product
Perfume Burberry Brit
and market

Accessories
 Burberry is a luxury clothing business; hence, retail accounts for 81% of its sales.
Wholesale and licensing have far lower contribution percentages, at 17% and 2%,
respectively.

According to the second pie chart, fashion accessories generate the most revenue
(37%). Men and women contribute almost equally, with each accounting for 28% of
total business revenue. Finally, the lowest revenue is only 6% for children and other
items.

Burberry's main markets are Asia Pacific, EMEIA, Americas.

2.2. Performance of Burberry Group PLC

2.2.1. Profitability ratio

PROFITABILITY RATIO
72.50%
62.50%
52.50%
42.50%
32.50%
22.50%
12.50%
2.50%
2021 2022 2023
Gross profit margin 0.7 0.706 0.705
Operating margin 0.222 0.192 0.212
Net profit margin 0.16 0.14 0.158

Gross profit margin Operating margin Net profit margin

Strength:

The ratio is almost unchanged

Profits did not decline despite global travel restrictions during the COVID-19 pandemic.

Profit increased gradually from 2020 to 2022

2.2.2. Liquidity ratios

LIQUIDITY RATIOS
2.9
2.5
2.1
1.7
1.3
0.9
0.5
0.1
2021 2022 2023
Current ratio 2.25 2.53 2.82
Quick ratio 1.71 2 2.25
Cash ratio 0.36 0.33 0.28

Current ratio Quick ratio Cash ratio

Strength:

A quick ratio greater than 1 means Burberry has enough current assets to meet all of
its short-term obligations.

Weakness:

The company's liquidity changed significantly, increasing from 2.25 to 2.82 due to
reduced inventory.

Burberry has high receivables.

2.2.3. Financial risk

Debt-to-Equity
0.88
0.86
0.86

0.84

0.82

0.8
0.79 0.79

0.78

0.76

0.74
2021 2022 2023

Debt-to-Equity

This ratio increases steadily from 2021 to 2023, indicating that financial leverage has
not improved and the ability to cover debt with operating income is decreasing.

2.3. Plan, targets and ambition of Burberry Group PLC

 Burberry’s plan
o Find opportunities to unlock growth in the next phase
 o Key elements:
 Harness the power of brand
Firmly anchored in luxury
• Refocus on Britishness and strengthen connection with British design, craft
and culture
• Amplify the brand through strong marketing and communication activations
with high-impact
Supercharge customer focus
• Develop a compelling customer proposition across all channels
• Acquire customers at pace – set ambitious acquisition targets across every
customer touchpoint
• Drive loyalty and retention
• Grow customer lifetime value
 Bring all product categories to full potential
Opportunities for growth across all categories
• Broadly double sales of leather goods, shoes, and women’s ready-to-wear and
grow outerwear by around 50% in the medium term
• Ambition to grow accessories to more than 50% of Group sales in the long
term
 Strengthen distribution
Retail – accelerate new store investment
• Financials of updated stores continue to show store productivity and AUR up
mid-teens percentage against equivalent
existing stores
• Transform productivity – target £25k per sqm
Wholesale – maintain presence to reach new luxury customers
E-commerce – grow to reach full potential

 Burberry’s targets and ambition

B. AUDIT REPORT, KAM AND OTHER ACCOUNTING
STANDARDS
3.1. An examination of audit report outcomes key areas
3.1.1. Audit opinion
The Burberry Plc has relatively experienced no changes in audit opinion through
three recent years, keeping the same four opinions:
• Burberry Group plc’s Group financial statements and Company financial statements
(the “financial statements”) give a true and fair view of the state of the Group’s and of the
Company’s affairs as at 1 April 2023 and of the Group’s profit for the 52-week
period then ended;
• The Group financial statements have been properly prepared in accordance with UK-
adopted International Accounting Standards;
• The Company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice;
• The financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
3.1.2. Materiality
There are considerable changes in the materiality level over the three-year period.
In 2023, the Group materiality accounts for £30m which represents 4.7% of profit before
tax. Meanwhile, that number reduces to £24m which represents 4.9% of adjusted profit
before tax by 2022 and £17.5m which represents 4.8% of adjusted profit before tax by
2021.
3.1.3. Scope of audit
a. Similarities
For all three years consecutively, to assess the risk of material misstatement in
financial statements, and to ensure adequate quantitative coverage of significant accounts
in the financial statements, auditors selected eight components covering entities within
the United Kingdom, Mainland China, Japan, Korea, the United States and Hong Kong
S.A.R., China, which represent the principal business units within the Group
b. Differences

(on an 2023 2022 2021

absolute
basis)
The 91% of adjusted 94% of adjusted profit 84% of adjusted profit
reporting profit before tax before tax before tax
components
78% of revenue 83% of revenue 82% of revenue

80% of total assets 82% of total assets 83% of total assets

The full 91% of adjusted 94% of adjusted profit 84% of adjusted profit
scope profit before tax before tax before tax
components
74% of revenue 79% of revenue 82% of revenue

77% of total assets 78% of total assets 83% of total assets

The specific 4% of revenue 4% of revenue 0% of revenue
scope
components 3% of total assets 4% of total assets 0% of total assets

The 9% of adjusted 6% of adjusted profit 16% of adjusted profit

remaining profit before tax before tax before tax
components

Reasons for No changing in A reduction in the scope The approach to audit

the changes the full scope or for Japan from a full scope is similar to the
specific scope scope component to a prior year external
components from specific scope audit with an increase
the prior year as component as it in the scope for the
these components represented a lower Japan component from
remain the most proportion of the a specific scope
significant to the Group’s adjusted profit component to a full
Group, by size and before tax (on an scope component.
risk, and the absolute basis) than in
coverage remains the previous year.
consistent with the
prior year.

Scope of audit in relation to climate change

Year Changes
2023 The effort in considering the impact
of climate change on the financial
statements was focused on evaluating
management’s assessment of the
impact of climate risk and climate
commitments, specifically on the
finished goods inventory provision,
impairment of retail store right-of-use
assets and property, plant and
equipment, and going concern
Reasons
The Group has explained in their Basis
of Preparation note how they have
reflected the impact of climate change
in their financial statements including
how this aligns with their commitments
in their sustainability strategy. There are
no significant judgements and estimates
relating to climate change.
 2022 Considering climate change was
focused on considering that the
effects of material climate risks
disclosed in the TCFD report on
pages have been appropriately
reflected in asset values and
associated disclosures, where values
are determined through modeling
future cash flows, this primarily
being impairment assessments
2021 The company did not mention the
scope of the audit in relation to
climate change
Governmental and societal responses to
climate change risks are still
developing, and are interdependent upon
each other, and consequently, financial
statements cannot capture all possible
future outcomes as these are not yet
known
The company has not mitigate climate
change risks aligned with the
recommendations of the Task Force on
TCFD

3.1.4. Going concerned

There are no remarkable changes in conclusions relating to going concerned in all
three consecutive years. Auditors have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the
Group and Company’s ability to continue as a going concern, have nothing material to
add or draw attention to about the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt the going concern basis of
accounting.
3.2. Specific examination of all Key Audit Matters (KAM)

KEY AUDIT MATTERS LEVEL OF RISK

2021 2022 2023

Valuation of Finished Goods inventory Increase Decreas Decrease
provision e
Impairment and impairment reversals of Decrease Increase Increase
retail store right-of-use assets and property,
plant and equipment.

Provision for uncertain tax positions Similar Increase Increase

DIFFERENCES

The responses of auditors for each type of KAM

3.3. Accounting standards related to KAMs

3.3.1. Fair value measurement (IFRS 13)

Burberry applied this IFRS to calculate the valuation of finished goods inventory
provision, impairment and impairment reversal of retail store right-of-use assets and
property, plant, and equipment, and provision for uncertain tax positions.

3.3.2. Impairment of Assets (IAS 36)

Burberry defines key terms that are essential to understanding its guidance, including, but
not limited to IAS 36:

 CGU
 corporate assets
 costs of disposal
 impairment loss
 recoverable amount
Burberry prescribes the timing requirements for performing quantitative impairment
testing as well as potential ‘indicators’ of impairment that may trigger impairment testing
for some assets or groups of assets. Specifically, Burberry requires that:

 goodwill, indefinite life intangibles, and intangible assets not yet available for use
are tested for impairment at least annually, in addition to when there is any
indication of impairment.
 all other assets are tested for impairment when there is any indication that the asset
may be impaired.

Burberry requires an entity to recognize an impairment loss when the carrying amount of
an asset or CGU exceeds its recoverable amount and provides guidance on how to
recognize that loss,
by outlining:

 the requirements for recognizing and measuring impairment losses for an

individual asset
 the requirements for allocating losses when such losses are calculated for a CGU,
and
 additional considerations for allocating an impairment loss when there is a non-
controlling interest.

Burberry sets out the requirements for reversing an impairment loss recognized for an
asset or CGU in prior periods by:

 prescribing timing for assessment

 providing indicators that an impairment loss recognized in prior periods for an
asset (other than goodwill) or CGU may no longer exist or may have decreased,
and
 prescribing the accounting for reversing a prior impairment loss, including
limitations on the amount that can be reversed.

Conclusions and recommendations

4.1. Responsibilities of Directors
 Monitoring and implementing improvement plans, strategies to attain company’s
targets.
 the Directors are responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
 In preparing the financial statements, the Directors are responsible for assessing
the Group and Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
 accounting unless the Directors either intend to liquidate the Group or the
Company or to cease operations, or have no realistic alternative but to do so.
 Recommendations
 Focusing on improving internal control to ensure it work effectively.
 Making policies to solve customer-related issues or manufacturing-related issues
or brand-related issues.
4.2. Responsibilities of Auditors
 Detecting any risks related to product manufacturing.
 Examination of all Key Audit Matters related to product manufacturing.
 Product manufacturing disclosures.
 Recommendations
 Need to add Key audit matters related to Product manufacturing.
Personal reflection
This assignment digging into Burberry plc has profoundly shaped my perspective
on corporate reporting and auditing. It has highlighted the complicated relationship
between managers and auditors within the corporation. Through analyzing Burberry's
audit report, I've come to appreciate the crucial role that auditing plays in ensuring the
reliability and reasonableness of financial information. Moreover, it has underlined the
importance of corporate reporting as a tool for stakeholders to estimate the performance
and integrity of a company.
In visualizing how I can utilize these insights in my future professional roles or
further study, I recognize the necessity of integrating strong auditing practices and
transparent reporting mechanisms into organizational frameworks. Whether in a
managerial position or pursuing advanced studies in finance or business administration, I
intend to take the advantage of these insights to support ethical business practices,
promote financial accountability, and ensure the credit of stakeholder. By prioritizing
comprehensive audits and clear, accessible reports, I aim to contribute to fostering a
culture of integrity and sustainability within any organization I'm part of.

Appendix
Appendix 1: financial appendix

Audit report 2021 2022 2023

Gross profit margin 70% 70,6% 70,5%

Operating profit margin 22,2% 19,2% 21,2%

Net profit margin 16% 14% 15,8%

Current ratio 2,25 2,53 2,82

Quick ratio 1,71 2,00 2,25

Cash ratio 0,36 0,33 0,28

Debt-to-equity 0,86 0,79 0,79

Appendix 2: Audit report appendix

Audit report of 2021 2022 2023

Melrose
Industries Plc

External audit EY
firm name

Independent Burberry Group plc’s Group financial statements and Company

Auditor's financial statements (the “financial statements”) give a true and fair
Opinion view of the state of the Group’s and of the Company’s affairs as at 1
April 2023 and of the Group’s profit for the 52-week period then
ended

Materiality £17,5m £24m £30m

Basis for Determined materiality based on Profit before tax

materiality

KAM1
Valuation of Finished Goods inventory provision

KAM2
Impairment and impairment reversals of retail store right-of-use
assets and property, plant and equipment

KAM3 Provision for uncertain tax positions